Black homes undervalued by $45K compared to white counterparts

The racial imbalance in home values have shown few signs of progress over the past eight years.

Homes in Black neighborhoods — those comprised of 50% or more Black residents — are worth $45,382 less on average compared to equivalent properties in white neighborhoods, according to Redfin. While the average disparity fell to $40,652 in 2020 from $45,573 in 2013, the data didn’t follow a steady trajectory of improvement over that time frame. Additionally, 2021’s small sample average of $55,126 undervaluation through February isn’t an encouraging start to the year.

The real estate brokerage and data provider based its study on over 7.3 million home sales from 2013 to 2021 in the top 10% most populous U.S. cities.

At the metro level, Buffalo, N.Y., had the worst undervaluation at 86% followed by 72% in both Memphis, Tenn., and Indianapolis, and 67% in Rochester, N.Y. Conversely, Nashville, Tenn., and Oklahoma City accounted for 1% undervaluations, with Tallahassee, Fla., and Durham, N.C. behind at 3% and 4%, respectively.

“In many instances, the policies in the marketplace today have a discriminatory effect and operate to entrench racial wealth and equity, limiting communities of color and other underserved communities from accessing credit and home equity,” Morgan Williams, general counsel at the National Fair Housing Alliance, said in an interview. “Those practices abuse the market in so many varied ways that addressing the problem will take dismantling the discrimination and bias in those various facets.”

Passed down from now-illegal redlining practices, those undervaluations compound over time and perpetuate the racial wealth gap, which is expected to widen in the pandemic recovery. As more appraisal biases have come to light, software developers have designed automation tools that promise to combat racial discrimination in such analyses. Beyond the individual homeowner, incorrectly low property values for these Black neighborhoods lead to lower taxes and a lack of community funding and investment.

Across the board, Black borrowers face the lowest accessibility rates to home financing, lose the most money over the lifetime of a mortgage and endure the most damage risk from natural disasters.

Recently, the Biden administration reinstated the disparate impact and affirmatively furthering fair housing rules. The disparate impact rule allows borrowers to file discrimination charges if lenders don’t comply with industry regulations and loan guidelines. The AFFH legislation enforced accountability at local levels to break up segregated housing patterns and overcome past redlining practices. The Trump administration had previously vacated both rules.

“There isn’t a policy that would make people less prejudiced. We would need to see a broad cultural shift in the way homebuyers view neighborhoods that are predominantly Black,” Redfin chief economist Daryl Fairweather said in the report. “There still appears to be a stigma against primarily Black neighborhoods and the longer Black Americans have lower home values than their white counterparts, the longer they are missing out on wealth that could be used for other investments and to pass along to their children.”