The team at eruka is addressing longstanding racial inequities in home values by transforming appraising methods themselves. Launched in 2022, eruka has created a new appraising methodology and is working on rolling out their approach with a new mobile application, eppraiser.
As founder Junia Howell explains, current appraising methods were designed to link a property’s value to the racial composition of the surrounding neighborhood. Although the specific processes have changed over time, neighborhood racial composition remains central to appraisal methodologies, she says.
The new tool, eppraiser, rejects racially biased, location-based approaches altogether, instead evaluating physical buildings’ usefulness for human habitation. The mobile application scans properties and uses big data to derive the remaining lifespan of each construction component (e.g., windows, water heaters, and flooring).
The potential impact of this approach is significant. Even if no one moved, no repairs were completed, and no new buildings were constructed, using this alternative appraising method has the potential to eliminate over 60 percent of the racial gap in housing prices, according to Junia. Those choosing to use this alternative approach could directly benefit from more equitable and affordable mortgage payments and property appreciation rates. Even those not using eppraiser may indirectly see an increase in home value equity through the impact eppraiser evaluations could have on tax assessments and market appraisals.
By actively refining its technology and expanding partnerships with community organizations, eruka is exploring new appraising approaches that can benefit many market players. Pilot programs are set for small- to mid-sized cities in Ohio, Pennsylvania, Kentucky, Michigan, and Maryland. As the technology proves effective, eruka plans to expand its reach nationwide. Ultimately, the organization aims to empower local communities with alternative, equitable appraising and financing services.
Fundamentally, eruka’s innovation is an appraisal tool that represents a systemic shift reshaping the current housing industry. By tackling racial bias, enhancing accuracy, and promoting sustainability, eruka is poised to contribute to a more inclusive housing market.
Valuing Homes in Black Communities
Homes in Black majority neighborhoods are undervalued by 23% on average compared to similar homes in other neighborhoods. Structural innovations that redesign our markets could create a more equitable housing market. To support new ideas, Economic Architecture and Brookings are mapping innovations across the US and hosting a challenge for innovators with promising market- and policy-based ideas.