• Thu. Dec 1st, 2022

Report details widespread racial disparities in real estate appraisals, local SoCal data shows lack of racial diversity

LOS ANGELES (KABC) — As a mortgage broker who works with many low-to-middle-income families, Mark Alston is familiar with the issues in the real estate appraisal industry.

“We’re holding our breath as we await upcoming valuations,” said Alston, owner of Alston and Associates Mortgage Company and chair of the National Association of Realtors’ Public Affairs Committee.

An appraisal, a home or property appraisal, can give many families the opportunity to refinance, send kids to college, start a business or retire, Alston explained.

“When you undervalue a property, it’s detrimental. It has a devastating impact on a community,” he said.

Racial bias has contributed to widespread undervaluation of homes across the country, especially those of black and Latino homeowners, federal commission finds National Fair Housing Alliance report released this week.

“It’s a very comprehensive report. We were, quite frankly, surprised by some of the findings. We didn’t expect to find out about some of the issues that we found,” said National Fair Housing Alliance CEO Lisa Rice. .

The nonprofit organization’s report details several studies of racial bias in assessments. They found valuation gaps, when properties receive an appraised value lower than the contract price, are more often found in black and Latino neighborhoods. Another study revealed the value of the house the gaps have widened since 1980.

In addition, studies have shown that the properties in Black neighborhoods were rated lower than similar homes in other neighborhoods, and that thousands of appraisal reports contained potential race-related flags.

“What our study shows is that these issues aren’t one-time, that there are really deep structural issues and barriers that no individual, no owner could overcome,” Rice said.

Experts said part of the reason for this bias is due to the lack of diversity in the appraiser industry.

“A lot of the time we get evaluators from outside the neighborhoods they’re evaluating in. They’re evaluating in an area that they’re sometimes afraid to be in,” Alston said.

In the Los Angeles metropolitan area, which encompasses Los Angeles County and Orange County, US Census Bureau survey data estimates that about two-thirds of appraisers are white, although the white population does not represent only about a third of the total population.

Only 14% of reviewers are Latino and 2% are black. These groups represent approximately 45% and 6% of the region’s population respectively.

Similar patterns can be seen in the Inland Empire.

Statewide, estimates place raters at around 70% white. Across the country, reviewers are 86% white.

Other federal agencies that study data on occupations suggest that the lack of diversity could be even more serious. For example, using different methods, the Bureau of Labor Statistics estimates that the percentage of white reviewers nationwide can be as high as 96%.

“We need diversity and access at all levels, because the reality is that being black, I can’t solve this on my own. It’s going to take all of us,” Alston said.

According to the National Fair Housing Alliance, there are barriers to entry into the industry that contribute to its lack of diversity.

“If you want to become an evaluator, you need to find someone who is already licensed and certified…to take you under their wing, much like an apprentice,” said NFHA CEO Rice.

The organization recommends ways to remove some of these barriers, such as streamlining the credentialing process, revising degree requirements, expanding the scope and tracking the demographics of those entering the profession. .

“When you look at the fact that the industry is already overwhelmingly white male, just think of the opportunities there will be for young people of color,” Rice said.

In a written statement, Appraisal Institute President Jody Bishop said the institute agreed with the report recognizing that “improved standards and greater diversity within the profession are essential elements for addressing equity and eliminating bias in assessment”.

“That’s why since 2018, the Appraisal Institute has worked to recruit and expand opportunities for appraisers of color and women through the Appraisal Diversity Initiative, Raised Ethical Standards for our members, brought together researchers and experts, worked closely with congressional leaders, and advanced legislation to require education about anti-discrimination and fair housing. and these efforts remain at the core of our work as an organization,” the statement continued.

The National Fair Housing Alliance report also recommended:

  • Training on the history of discrimination, segregation and the role of the rating industry
  • Training on the costs of appraisal bias to families, including the impact on homeownership and wealth gaps by race
  • Data collection and transparency on assessments and complaints
  • More responsibility
  • Mark Alston said the report will be an “invaluable tool in trying to reverse the damage done by the wealth stripping activity of undervalued assessments in communities of color and especially in black neighborhoods.”

    He said it validated what he had dealt with in his 32 years in the real estate industry.

    “How can we go back and find a way to fix the situation of rating bias that we have for undervalued neighborhoods across the country? How can we fix this problem?” Alston asked.

    “I think remediation is what is needed, while securing our future by using diverse assessors and diverse assessment training, and more solidarity when it comes to solving the problem,” a- he declared.

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