Bill targets discrimination in home and commercial appraisals

Measure would create a task force to study disparities in valuations

National /
Apr.April 28, 2021 08:00 AM
U.S. Reps. Ritchie Torres and Emanuel Cleaver II (Getty, Congress)
U.S. Reps. Ritchie Torres and Emanuel Cleaver II (Getty, Congress, iStock)

A new congressional bill seeks to root out racial discrimination in the residential and commercial real estate appraisal industry.

The measure, sponsored by Reps. Emanuel Cleaver II and Ritchie Torres, would create an interagency task force to study factors that lead to disparities in property valuations and lay out specific steps to combat them. The task force would examine federal collateral underwriting standards and guidance, as well as barriers to entry that disproportionately prevent minorities from becoming appraisers.

“Appraisal discrimination is hard to detect and it’s hard to solve,” Torres, a Democrat who represents the South Bronx, said in an interview. He said that rather than simply enacting sweeping legislation, the task force approach would allow civil rights activists, industry professionals and other stakeholders to think deeply about how to address bias in property valuations.

“It is a challenging undertaking, but it is far from mission impossible,” he said.

A 2018 study by the Brookings Institution found that owner-occupied homes in Black neighborhoods are, on average, found to be worth 23 percent less than those in areas with very few or no Black residents. Homes were undervalued by an average of $48,000, amounting to $156 billion in cumulative losses, according to the report.

Last month, more than 30 members of Congress, including Cleaver and Sens. Amy Klobuchar, Elizabeth Warren, Bernie Sanders and Cory Booker, signed a letter calling on the Federal Financial Institutions Examination Council, which regulates appraisals, to work with the industry to “reduce the racial appraisal gap and to address the long-term undervaluation of neighborhoods of color.”

“Years of discriminatory policies — such as segregation, limited access to federally backed mortgages, and restrictive neighborhood covenants — have created significant barriers to homeownership for families of color,” the letter states. “These structural factors continue to exist today.”

A representative for the FFIEC didn’t immediately respond to requests seeking comment.

Appraisal trade groups have acknowledged the need to address racial bias in home valuations and to improve diversity in the industry. The Appraisal Institute, an international group based in Chicago, backs Torres and Cleaver’s bill but felt the March letter overgeneralized the issue. In response to Klobuchar and other members of Congress, the group said it supported “the themes and goals outlined” in the letter but objected to what it saw as the implication that “appraisal valuations are substantially and widely impacted by racial bias.”

“We must confront and combat potential bias in appraisal, and we support vigorous enforcement if discrimination is proven,” president Rodman Schley wrote in a letter to lawmakers. “However, we must not lose sight that structural biases within the broader marketplace and among all stakeholders within real estate and lending continue to play significant roles that impact the realities of the real property market.”






    Related Articles

    arrow_forward_ios
    Treehouse co-founders Joe Green and Prophet Walker and with 4421 S. Crenshaw Boulevard (LinkedIn via Walker, Warcus & Millichap, WikiMedia / Tony Maesto)
    Co-living startup Treehouse plans second complex in Los Angeles
    Co-living startup Treehouse plans second complex in Los Angeles
    Renderings of The Star
    The Star, a $500M office tower project, looks to light up Hollywood
    The Star, a $500M office tower project, looks to light up Hollywood
    The Boyd Street fire in May, 2020 (Getty)
    LA fire captain sues building, vape shop owners over May 2020 explosion in downtown
    LA fire captain sues building, vape shop owners over May 2020 explosion in downtown
    (Getty Images)
    SoCal’s “Space Beach” is ready for liftoff
    SoCal’s “Space Beach” is ready for liftoff
    Clockwise from top left: Kilroy Realty CEO John Kilroy, Boston Properties CEO Owen Thomas, TMG Partners CEO Michael Covarrubius and Eastdil Secured CEO Michael Van Konynenburg (Kilroy, LinkedIn via Thomas, TMG Partners, LinkedIn via Van Konynenburg, Getty)
    “We gotta get people back to the office”: West Coast landlord execs press for return
    “We gotta get people back to the office”: West Coast landlord execs press for return
    Oxford Properties CEO Michael Turner and the campus (Oxford)
    Oxford moves into LA with $134M industrial buy
    Oxford moves into LA with $134M industrial buy
    Fairfield Residential CEO Greg Pinkalla and Madison at Town Center (Fairfield, Marcus and Millichap)
    Apartment giant Fairfield Residential pays $62M for Valencia complex
    Apartment giant Fairfield Residential pays $62M for Valencia complex
    Michael Shvo and 9200 Wilshire renderings (Shvo, Getty)
    Shvo signs Mandarin Oriental to Beverly Hills residential project
    Shvo signs Mandarin Oriental to Beverly Hills residential project
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...