Biden administration targets racism in home appraisals
The Biden administration is taking steps to combat racism in home appraisals — an issue viewed as a significant factor in the wealth gap between white people and Americans of color.
Why it matters: Homeownership is essential to wealth accumulation for many Americans, but disparities in home appraisals often mean that people of color are starting at a disadvantage. Below market home appraisals can hinder access to home loans, limit refinancing options and depress selling prices.
Driving the news: A task force formed by President Biden in June released an action plan Wednesday calling for several measures to thwart racism in the home valuation process, including:
- Inserting a “nondiscrimination quality control standard” into algorithms generating appraisals.
- Removing “unnecessary” barriers to becoming an appraiser, a profession that’s currently 97% white.
- Bolstering oversight.
- Providing information on how people can obtain a new appraisal.
Context: Homes in majority Black neighborhoods are worth an average of 23% less than homes in neighborhoods with “very few or no Black residents” and similar home quality, according to a 2018 Brookings Institution study.
- While bias in appraisals is one reason, other factors such as New Deal-era "redlining” and the fact that Black families are disproportionately denied mortgages also contribute to the homeownership gap between Black and white Americans.
The big question: Will the appraisal industry embrace the plan issued by the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE)?
- The plan is a “new component of this critical, ongoing conversation,” the Appraisal Foundation, which sets valuation standards, said in a statement. “Our boards look forward to reviewing the recommendations more fully in the coming weeks.”
What they're saying: “The Action Plan calls for significant regulatory and oversight changes but does not outline specific plans,” Jody Bishop, president of the Appraisal Institute, a professional association, said in a statement.
- “Transparency and accountability are important, but these goals should be balanced with maintaining industry independence and promoting entry into the profession.”