There has long been anecdotal evidence of racial bias when it comes to real estate appraisals. Numerous stories have been published about black homeowners finding their houses appraised for more after they spoofed that a white family was living there. But up until recently, there was no concrete, statistically significant evidence of this bias. That all changed in June of 2021 when President Biden’s administration announced the creation of PAVE, “an inter-organizational task force on property appraisal and valuation equity.” After hearing from researchers and advocates who struggled to understand the extent of racial bias in the appraisal industry, PAVE has made public a standardized data set with comprehensive appraisal information from both Fannie Mae and Freddie Mac dating back to 2013.
With this data, researchers at the University of Illinois Chicago and Washington University in St. Louis conducted their recent research that identified connections between the appraisal value of buildings and the neighborhood’s racial makeup. The first big finding was that houses in neighborhoods with predominantly black or POC residents only appraised for half of what the same house would appraise for in a predominantly white neighborhood. These inequalities prove to be worst in American Indian, Alaska Native, Southeast Asian, and Pacific Islander communities.
The research also suggests that the bias is getting worse despite technological advancements in the appraisal process. Inequitable appraisal value has increased over 75 percent in the last decade and was exacerbated during the pandemic, especially in the hottest housing markets.
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