Housing devaluation in Black neighborhoods is not merely a consequence of market fluctuations; it is a systemic issue rooted in structural inequities that persist despite the existence of race-neutral policies. Research shows that homes in predominantly Black communities are often valued significantly lower than those in white neighborhoods, revealing a pattern that transcends individual appraisals and points to pervasive biases within our housing systems. This devaluation is a reflection of historical injustices and ongoing discrimination that extract value from these neighborhoods and their residents.
While we should aim to restore the value that’s been extracted by racism, providing relief for those harmed is not enough; we must develop a comprehensive suite of market and policy solutions that directly address the practices and policies perpetuating these disparities. By tackling the core issues that lead to the loss of home value, we can begin to restore equity and dignity to communities that have been systematically marginalized.
In our drive to propel solutions that bolster housing equity, the Brookings Institution is partnering with Economic Architecture. Through a collaborative challenge, we aim to nurture a new generation of innovators who will craft policy and market-driven solutions to combat housing devaluation.
Economic Architecture and the Brookings Institution are partnering to advance a new generation of structural innovations to ensure homeowners in Black-majority neighborhoods can fully realize the value of their assets.
Learn more about the Valuing Homes in Black Communities Challenge.
Since we launched our first collaborative challenge: Valuing Homes in Black Communities in 2021, there’s been a great deal of activity to combat housing discrimination shown in systematically lower home valuations in majority-Black neighborhoods and with Black homeowners. Government leaders, housing policy actors and entrepreneurs have acknowledged, corroborated or validated the findings in the 2018 Brookings Report, The devaluation of assets in Black neighborhoods—which showed homes in Black-majority neighborhoods are priced on average $48,000 less than comparable homes in white-majority neighborhoods.
The government-sponsored enterprises Freddie Mac and Fannie Mae found substantive disparities in appraisal values between majority white neighborhoods and their Black and Latino counterparts. In 2021, Freddie Mac found that minority applicants are “more likely to receive an appraisal value lower than the contract price.” Specifically, Freddie Mac found gaps for a large fraction of appraisers and ruled out common explanations for differences including “comparable sale (or comp) distances, comp reconciliation, variances in sale prices of comps, and possible systematic overpayment.”
In 2022, Fannie Mae reported that Black borrowers who refinanced their home on average received a slightly lower appraisal value relative to automated valuation models, and that homes owned by white borrowers were more frequently overvalued than homes owned by Black borrowers. The same year, the Federal Housing Finance Agency published the New Uniform Appraisal Dataset (UAD) Aggregate Statistics Data File, making once unreleased information available to the public.
Researchers like Brent Ambrose, James Konklin, and Ed Coulson also found systematically lower appraised values for minority homeowners. However, they also reported that lower valuations didn’t lessen when the homeowner and appraiser share the same race, suggesting implicit bias is not driven by white appraisers alone.
Using the FHFA data and our own research, we continued to find that homes in Black neighborhoods are valued roughly 21% to 23% below what their valuations would be in non-Black neighborhoods. However, after adjusting for characteristics of homes and neighborhoods, we found that appraisal transactions in Black-majority neighborhoods are 1.9 times more likely to be appraised under the contract price than homes in white-majority neighborhoods.
In cities across the U.S., there are a range of motivated people and organizations, advancing racial equity in the housing market. Our newly released Innovation Map gives you a look at the innovation landscape to see what initiatives are taking flight and who is flying them.
- In Baltimore for example, Bree Jones is the founder of Parity Homes, an equitable development company, to pioneer a way to bring development without displacement to historically Black-majority neighborhoods in West Baltimore now experiencing hyper-vacancy. Through Parity Homes, Bree is building a different approach, anchored by what Bree calls “collective economics,” to create affordable homeownership of newly renovated properties in West Baltimore. Parity’s model leverages mutual goals or preferences of a group to secure economic gains for the whole group.
- In Memphis, Roshun Austin and The Works, Inc. is leading a transformative revitalization effort in Klondike, a historically disinvested community. Roshun and her team at The Works, Inc. are collaborating with residents to craft a comprehensive revitalization plan for Klondike, focused on restoring value to the neighborhood without displacing current residents.
- In Washington, D.C., John Green and George Scott of Blackstar Stability are realizing a unique market opportunity to combat the predatory practices associated with land contracts in small-dollar homes sales—a market where banks typically have little incentive to offer mortgages. Blackstar operates by purchasing small-dollar home titles in bulk, allowing them to negotiate more favorable terms. They then restructure the one-sided contracts into legally sound, affordable mortgages, which are sold back to homebuyers.
- In Houston, Ashley Allen and the Houston Community Land Trust (HCLT) are leading efforts to fight gentrification in Houston’s historically Black neighborhoods. Through its Homebuyer Choice Program, HCLT enables homebuyers below 50% of the Area Median Income to comfortably purchase a home and, in many cases, at a cost lower than renting. Buyers in the program can choose a home anywhere in the Houston metro area, and if it meets certain criteria, HCLT will subsidize the purchase with up to $150,000. Once the owner buys it, the home becomes a permanent part of the CLT, whose mission is to keep it secure and affordable.
In 2022, the U.S. Department of Housing and Urban Development (HUD) launched a series of roundtables aimed at addressing the pervasive issue of appraisal bias, culminating in the creation of an action plan that led to the establishment of PAVE (the Property Appraisal and Valuation Equity initiative). This interagency taskforce is dedicated to eliminating racial and ethnic bias in home valuations, bringing together stakeholders to develop innovative strategies to confront these biases head-on.
Fast-forward to 2024, and HUD has reached a groundbreaking settlement with the Appraisal Foundation, marking a significant step forward in ensuring equal opportunity within the appraisal profession. This agreement resolves a Secretary-initiated complaint against the Appraisal Foundation, which alleged discriminatory barriers that hindered qualified Black individuals and other people of color from entering the appraisal field. Such barriers were found to violate the Fair Housing Act, and the details of this important Conciliation Agreement can be reviewed for further context.
There is an assumption inherent in all of the aforementioned activities: housing devaluation is a structural issue that needs to be addressed.
We invite you to participate in the Valuing Homes in Black Communities Challenge, for a chance to receive philanthropic funding from Economic Architecture for innovative market-based and policy-based solutions that address the persistent inequities in housing valuations. Prize funding will be awarded based upon the decision of an independent panel of judges and experts. As we work to repair the damage caused by historical injustices, we cannot be stalled by those who continue to deny facts, cutting our collective nose to spite our face, leaving equity and dignity on the table. We must confront the structural issues at play and develop a comprehensive approach that fosters lasting equity and dignity.
We are calling on innovators, entrepreneurs, policy makers, and community advocates to participate in this critical challenge. If you are passionate about creating solutions that enhance housing equity and uplift marginalized communities, we want to hear from you. Together, we can drive meaningful change and ensure that every home is valued fairly, regardless of its location or the race of its owners.
To learn how you and your organization can participate in this challenge and contribute to reshaping the future of housing equity, please read more here and join the Challenge today. Your ideas and efforts can make a significant impact, and together, we can build a more equitable housing landscape for all. Join us in this vital movement to value homes in Black communities and create a brighter future for families and municipalities alike.