Jun 1, 2023 - Economy

White House unveils plan to combat racism in home appraisals

Illustration: Annelise Capossela/Axios

The White House on Thursday announced several measures designed to combat racism in the home appraisal process, targeting algorithmic bias and underrepresentation in the profession.

Why it matters: Homeownership is essential to wealth accumulation for many Americans, and below-market home appraisals can reduce access to home loans, limit refinancing options and hurt selling prices.

What they're saying: "Home appraisals are meant to be fair and objective estimates of the market value of a property,” Vice President Kamala Harris told reporters Thursday. “However, far too often they are not."

  • "Black homeowners are more likely to have their homes undervalued than other homeowners," she added.
  • "And homeowners in majority Black and majority Latino neighborhoods are almost twice as likely to be undervalued.”

Driving the news: After forming a task force a year ago to study the matter, the White House released details of its plan:

  • Six agencies are proposing a rule to include “a nondiscrimination quality control standard” in algorithms used in the appraisal process.
  • States are urged to lower educational requirements for becoming an appraiser, which the White House called “unnecessary barriers” with “no evidence” that they “produce more ethical, accurate or credible appraisals.”
  • Publish more Federal Housing Administration data to cast a spotlight on appraisal disparities.

By the numbers: 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.

  • And only 5% of appraisers are people of color, meaning “the appraisal profession is among the least diverse in the country,” White House domestic policy adviser Neera Tanden said.
  • "We are building and expanding training pipelines for underrepresented groups to make sure that people who conduct home appraisals better reflect the communities they serve," Harris added.

What others are saying: “The Appraisal Foundation shares the PAVE Task Force’s commitment to root out bias and discrimination in the appraisal profession, and fully supports the very meaningful steps PAVE has been taking," The Appraisal Foundation President Dave Bunton said in a statement, adding that the organization has already made nondiscrimination part of its professional standards.

What we're watching: Whether states embrace the White House's push for lower barriers to entry into the home appraisal profession.

  • At this point, many have greater requirements than the federal government.

Editor's note: This report has been updated to include comment from The Appraisal Foundation.

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