Historically, homeownership has been a tool used by many Americans to create generational wealth and realize the American dream. Unfortunately, for many members of the Black community, this has been a dream deferred due to the discrimination many Black homeowners experience during the appraisal process.
While appraisers are bound by the Fair Housing Act of 1968, it appears that individuals in the Black community still face some level of housing discrimination. According to the Brookings Institution, predominantly Black neighborhoods hold $609 billion in assets, but due to devaluation during the appraisal, the assets are assessed at nearly half that price. Sadly, the homes in Black neighborhoods are underpriced by $156 billion.
Brookings defines devaluation as "the percent discount in median home values between neighborhoods with 50% Black population and neighborhoods with no Black residents, after accounting for structural characteristics of homes and neighborhood amenities."
As you can see, Black homeowners lose a significant amount of wealth due to the devaluation of their real estate. Owning property that is less valuable makes it more difficult for individuals in communities of color to transfer wealth from generation to generation. As many know, this generational transfer of wealth is key to becoming wealthy -- and this major key is diminishing within the Black community.
To tackle this issue, the House Financial Services Committee approved the Real Estate Valuation Fairness and Improvement Act, H.R. 2553, on April 20, 2021.
The Real Estate Valuation Fairness and Improvement Act
The Real Estate Valuation Fairness and Improvement Act aims to combat disparities in America's residential and commercial real estate appraisal industry. To combat existing disparities, the Act aims to:
- Establish an interagency task force to analyze the underwriting standard and provide guidance.
- Direct the task force to submit reports to Congress detailing the research findings and the steps the task force has taken to improve real estate property valuations.
- Require the task force to establish an advisory committee -- consisting of civil rights advocates, consumer advocates, industry representatives, and other stakeholders -- to provide advice to the task force.
- Authorize a federal grant program to promote diversity and inclusion in the appraisal profession.
The hope is that the Real Estate Valuation Fairness and Improvement Act will increase equity and limit the number of times Americans like Abena and Alex Horton have to remove their family portraits to increase the appraised value of their home.
The future of appraisals
With the Appraisal Institute fully backing the Real Estate Valuation Fairness and Improvement Act, Americans will likely experience more equity during the appraisal process. This increase in equity stems from appraisers being required to undergo additional training and the industry being under stricter scrutiny by both the general public and public officials.
Equity will look like homes valued for their actual worth and not the owner's ethnic or racial background. It will also enable more Americans to retain their wealth and pass it on to future generations and likely leave states with more funds in their coffers. The greater a home's assessed value, the more property taxes its owner must pay, and the more states can collect.
As you can see, we all win when there is equity during the appraisal process!
Millionacres bottom line
The devaluation of Black-owned homes and neighborhoods over the last several decades is outright wrong. Many people believed that the Fair Housing Act of 1968 limited discrimination, but as the world slowed its pace during the COVID-19 pandemic, the housing discrimination that has remained alive and well through the years was brought to light. With the passing of the Real Estate Valuation Fairness and Improvement Act, more Americans can now hope for a brighter day.