U.S. plan aims to end racial, ethnic bias in home appraisals

Vice President Kamala Harris announced a plan Wednesday intended to end racial and ethnic discrimination in the appraisal of home values, part of a broader federal effort to address a wealth gap that systemic inequality has perpetuated.

The plan contains 21 steps to improve oversight and accountability, including a legislative proposal to modernize the governance structure of the appraisal industry. Appraisers help to determine the value of a home so that buyers can receive a mortgage.

“Black and Latino people often have to pay more for their mortgage, receive less when they sell the home and are less able to access home equity lines of credit,” Harris said at the White House. "Our administration will continue to fight to ensure that all homeowners and homebuyers in our nation are treated fairly."

Multiple reports, including a September analysis by mortgage buyer Freddie Mac, show that appraisers are more likely to undervalue homes in Black and Hispanic neighborhoods. This form of discrimination widens the racial wealth gap and makes it harder for many Americans from disadvantaged backgrounds to move up the economic ladder.

One Black homeowner in Indianapolis found the appraised value of her home went from $125,000 to $259,000 after she declined to state her race in her application and removed all family photos and African American art in the home.

As part of the action plan, the government will expand the complaint hotline for the Department of Housing and Urban Development and the Consumer Financial Protection Bureau. There also will be appraisal bias training in homebuyer education classes and efforts to ensure that the computer systems used to value homes do not perpetuate racial biases.

Homeownership rates in New York vary widely among different racial groups, according to a report released last month by the National Association of Realtors. The report showed 66% of white New Yorkers owned their homes in 2020, while the rates were 52% for Asian American New Yorkers, 35% for Black New Yorkers and 28% for Hispanic New Yorkers. The state rate for Hispanics was the lowest in the country.

The action plan takes steps to provide true oversight of the appraisal industry and to diversify the ranks of appraisers, 97% of whom are white, said Jonathan Miller, president and CEO of Miller Samuel, a Manhattan appraisal firm. He noted the industry is hard to break into because of requirements around training. Licensed real estate appraisers need 1,000 hours of experience over at least a two-year period, according to the New York Department of State.

“It’s a very mentorship-based industry and it really takes someone two years before they’re valuable to their employer,” Miller said. “You have an industry that it looks like there’s a structural flaw, and the structural flaw begins with entry into the profession.”

Some elements of the action plan include updating qualification criteria as well as education and experience requirements to lower barriers to entry to the profession and advance the diversity of the workforce. Workers conducting appraisals for federal programs would be required to have training in fair housing standards and the industry would be encouraged to require such trainings as well.

With Jonathan LaMantia