Tag Archives: appraisals

Systemic Racism

I have been very critical of the Indianapolis Star since its acquisition by Gannett. (In all fairness, it wasn’t a particularly distinguished publication before that.) And while I remain unimpressed overall–and positively livid over its neglect of adequate reporting on state and local government– I must compliment the paper on recent reporting that not only highlights an unfair situation, but provides readers with an excellent illustration of what is meant by systemic racism.

Much of the pushback that accompanies accusations of systemic racism can be attributed to a widespread misunderstanding of what the term means. It doesn’t imply intentional animus–instead, it refers to widespread systems that may well have been intentional at one time, but have since simply been accepted as “the way things are.” (Redlining, for example, was long justified as simply a reflection of the differences between “good’ and “bad” neighborhoods, despite the fact that those designations often simply reflected the racial makeup of the inhabitants of those neighborhoods.)

The lede to the Star report tells the story:

Carlette Duffy felt both vindicated and excited. Both relieved and angry. For months, she suspected she had been low-balled on two home appraisals because she’s Black. She decided to put that suspicion to the test and asked a white family friend to stand in for her during an appraisal. h Her home’s value suddenly shot up. A lot. h During the early months of the coronavirus pandemic last year, the first two appraisers who visited her home in the historic Flanner House Homes neighborhood, just west of downtown, valued it at $125,000 and $110,000, respectively.

 But that third appraisal went differently.

To get that one, Duffy, who is African American, communicated with the appraiser strictly via email, stripped her home of all signs of her racial and cultural identity and had the white husband of a friend stand in for her during the appraiser’s visit.

The home’s new value: $259,000.

This particular situation isn’t a one-off, and it isn’t unique to Indiana. Media outlets have reported several similar situations around the country. As one expert noted, it is almost reflexive–what we might call “implicit bias.”  When appraisers see Black neighborhoods, they make unwarranted assumptions about the prevalence of crime and the quality of the schools, and devalue the property accordingly.

It isn’t just the appraisal process. Duffy qualified for a lower interest rate when her application omitted any indication of her race, even though her credit report didn’t change.

Toward the end of the article, there was a good explanation of the difference between systemic and individual racism.

Andre Perry, of Brookings, has conducted research on how racial bias distorts the housing market. He compared home prices in neighborhoods where the share of the Black population is greater than 50% to homes in areas where the share of the Black population is less than 50%.

They controlled for crime, walkability and other factors that could effect home prices. After those factors were controlled for, homes in Black neighborhoods were underpriced by 23% or about $48,000 per home. Cumulatively, there was a loss of $160 billion in lost equity.

Perry’s research preceded the crafting of the Real Estate Valuation Fairness and Improvement Act of 2021, which was introduced in the U.S. House of Representatives in April. The bill addresses racial disparities in residential and commercial real estate appraisals.

Discrimination in appraisals can be both systemic and individualistic.

“Systemic is the price comparison model,” he said. “When you only compare homes to like peers in neighborhoods that have been discriminated against, you essentially just recycled discrimination over and over again … You have individual acts of racism and you have more systemic reasons why. Both are robbing people of individual and community wealth.”

When individual bigotry raises its ugly head, most other people can see it for what it is. Systems that incorporate assumptions that were originally bigoted, however, are much harder to see and to root out.

That said, it’s a task we need to attend to.