Homes in primarily Black neighborhoods are undervalued by an average of $46,000 when compared to similar homes in primarily white neighborhoods, according to a recently released Redfin analysis and report. Redfin analyzed data from more than seven million home sales between 2013 and February 2021, and determined that “bias and systemic racism” are the only explanation for the difference in home values.
Redfin Senior Economist Reginald Edwards blamed racist housing policies – most of which were outlawed – and biases in mortgage lending practices and property appraisals. For example, one study found that, on average, homes in predominantly white neighborhoods have increased in value by $200,000 more than similar homes in Black neighborhoods since 1980, which is after racist practices like redlining were outlawed.
Redfin Chief Economist Daryl Fairweather said the results of the study draw attention to the fact that Black Americans have significantly less accumulated wealth than white Americans, which is highlighted by the homeownership gap: Just more than 44% of Black Americans own their primary residence, compared to 74.5% of white Americans. Black homeowners also have less equity in their properties than other races, according to Redfin data.
As Edwards noted, the value discrepancy in home values is in part attributable to racial discrimination in appraisals. The Brookings Institute has studied this for years, and recently announced a “large-scale effort to foster a new generation of structural innovations to address systemic racism in the housing market.” And earlier this year, the Appraisal Institute acknowledged and committed to eliminating unconscious valuation bias in its appraisals.
The Redfin analysis determined that the racial discrimination gap has also created disparities in the amenities located in Black and white neighborhoods. Black neighborhoods are undervalued, and the people who live there also have less access to green spaces, a higher instance of underfunded schools and worse air quality.
Real estate agents can fight racism and discrimination in their day-to-day practices by remembering to only show clients and customers homes based on their requested amenities and budget, and avoid steering them toward a particular neighborhood or area because of the clients’/customers’ membership (or non-membership) in one of the seven federally recognized protected classes.