Chicago appears to be turning the page on racial bias in real estate appraisals.
The number of appraisals skewed by racial discrimination decreased by 80 percent between between 2021 and 2023, Crain’s reported, citing a study by Fannie Mae, one of the largest housing finance agencies.
The report sheds light on the ongoing efforts to tackle an issue that contributes to the racial wealth gap. Since 2021, heightened awareness of racial bias in appraisals, spurred by sources like the White House and the Chicago-based Appraisal Institute, has prompted increased scrutiny of appraisals for signs of bias.
In 2021, Fannie Mae identified bias in approximately 0.15 percent of the appraisals it reviewed. By 2023, the figure plummeted to 0.03 percent, suggesting a notable improvement in appraisal practices. While specific figures for 2023 were not provided, an estimated 300 cases of bias were identified, a stark reduction from the 1,500 cases flagged in 2021.
The decline in bias, according to industry experts, reflects progress in preventing future harm but does not address the repercussions faced by those previously affected.
One study by the Brookings Institution found that median household wealth in Black communities is about $240,000 less than White households. Investigations have caught appraisers assigning lower values to homes they know to have Black owners.
Addressing the learning curve has contributed to the positive trend. Fannie Mae actively engages appraisers found to exhibit bias, through educational feedback mechanisms. The recurrence of bias among appraisers who received violation letters decreased significantly from 2021 to 2023, the outlet reported.
Efforts to promote diversity within the appraisal profession are gaining traction, with initiatives like Fannie Mae’s Appraiser Diversity Initiative striving to attract and retain a more diverse talent pool. Collaborative partnerships with organizations such as the Urban League and regulatory bodies further bolster endeavors to enhance access and opportunity within the profession.
—Quinn Donoghue
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