Racial Bias by Neighborhood in Home Appraisals

[Ron Brady]

Background & Context

Today's New York Times reports on a new publication, Appraised. The publication argues, based on recently released appraisal data-sets, that current day appraisal processes bake the results of historic racist redlining into current home values. This yields, among other findings:

1. 1. Similar homes in White communities being appraised as 2x more valuable than homes in communities of color
2. 2. This inequality in appraised values increased 75% from 2013-2021
3. 3. Homes in White neighborhoods appreciated 2x faster than homes in communities of color during the pandemic
4. 4. Appraisers evaluate Indigenous, Pacific Islander and Southeast Asian homes as the least valuable

The authors of Appraised propose two action steps:

1. 1. Reparations
2. 2. New approaches to appraisals that do not rely on past sales

Per the NY Times, the Appraisal Foundation, which sets national standards for real estate valuation, did not respond to a request for a comment.

My Take

1. 1. Redlining Echoes Today - I am persuaded that if extinct laws boosted or hindered neighborhood home valuations based on race, then basing current-day appraisals on prior sales will inevitably echo prior race-impacted valuations.
   
2. 2. Reparations - Given the report's findings re: different races, I do not see how reparations solves this specific problem.
   
3. 3. New approaches to appraisals - I concur with the authors' challenge to the appraisal industry to consider new appraisal standards that decouple the value of a home from the racial composition of its neighborhood.

I welcome thoughts, challenges and alternative solutions BP, particularly from any professional appraisers. Thank you for reading.