“Black communities are routinely undervalued. Even when they are among the nation’s wealthiest” writes Tracy Jan for the Washington Post.
Undervaluation of homes plays a large part in racial wealth inequality. In 2019 the median wealth of White families was eight times that of Black families in the United States, according to a Federal Reserve survey, and those figures had hardly changed over the previous three years.
For homeowners, appraisal bias can reduce their ability to leverage home equity for things like repairs, family education, business or any of life’s important events. For buyers, appraisals lower than the contract price can require a larger down payment. And for sellers, profit and wealth accumulation is reduced. Undervaluing properties can also lead to lower property taxes which are used to fund local services and amenities. According to a new Biden Administration report, just one low appraisal could have wealth consequences for an entire community. And a study by The Brookings Institute found that, despite similar attributes and amenities, homes in Black neighborhoods are appraised at, on average, 23% less.
Andre Perry, a senior fellow at Brookings and author of Know Your Price: Valuing Black Lives and Property in America’s Black Cities, believes this loss of equity adds up to approximately $156 billion – equity which could have been spent on education and entrepreneurship.
Image courtesy of Small Change