President Joe Biden took another step toward addressing the persistent discrimination in housing and business that has been holding generations of Black Americans back from building wealth that can be passed down to future generations.
Biden’s administration announced on Tuesday it was launching an interagency effort to combat unfair appraisals for homeowners of color and fight inequality in the real estate sector. U.S. Department of Housing and Urban Development Secretary Marcia Fudge was tapped to lead the initiative.
The move comes a century after the Tulsa Race Massacre led to the destruction of that city’s “Black Wall Street,” one of the most prosperous African American communities in the nation in the early part of the 20th century.
On May 31 and June 1, 1921, white residents bombed and set fire to the community, murdering an estimated 300 Blacks, destroying scores of homes and businesses, and leaving roughly 10,000 residents homeless. The destruction came after a white woman falsely accused a Black man of assault.
“Because disparities in wealth compound like an interest rate, the disinvestment in Black families in Tulsa and across the country throughout our history is still felt sharply today,” the White House said in the fact sheet it released. The administration pointed out Black American families have only a median 13 cents of wealth for every dollar held by white families.
“The Biden-Harris Administration is announcing new steps to help narrow the racial wealth gap and reinvest in communities that have been left behind by failed policies,” it said.
Coming at a time when it seems the nation is more ready to reckon with its legacy of racism, the initiative was met with optimism in some quarters.
“It has a lot of teeth because Biden is saying it at this particular moment of time,” says Donnell Williams, president of the National Association of Real Estate Brokers, an organization for Black real estate professionals. “The Black community is holding Biden accountable now.”
While details on the initiative were slim, other highlights included putting billions of dollars toward community-driven infrastructure projects, creating a tax credit to lure development in low- and moderate-income areas, and providing grants to local governments that put up more affordable housing.
The challenge in leveling the appraisal playing field is many older homes and neighborhoods were designed with the opposite goal in mind. Redlining was a federal government–sanctioned policy that effectively segregated the nation by race in the early part of the 20th century. People of color were prevented from moving into white communities, and instead were often consigned to areas with cheaper, not-as-nice housing stock, often on smaller lots. These neighborhoods have also traditionally been starved of resources, such as access to quality public transit, desirable shopping, and other amenities. Undesirable features such as trash facilities or power plants typically wound up in these communities, which had no political voice to protest.
What this means today is that homes in traditionally Black communities may not be as desirable as the ones in white communities, even if they are comparable in quality, due to their location.
Even in predominantly white or mixed-race neighborhoods, there have been highly publicized cases of Black homeowners having their homes appraised at a lower value than they believed they were worth. When a white friend posed as a homeowner for a subsequent appraisal, these homeowners reported, their valuations went up substantially.
Appraisal disparity by race is “definitely a problem, without a doubt,” says Williams, who is also a real estate broker at Destiny Realty in Morristown, NJ. “If the property does not appraise, you’re impacting the loan you wanted to get to open up a small business, your kid has to get a loan to go to college. If our properties don’t appraise, then we can’t do other things. We’re always behind.”
Williams had a client last year who asked a white friend to come over to his home and pretend to be the owner before an appraiser came over. His client was attempting to refinance his property.
“He was afraid that he wasn’t going to get as much value for his house to do the refinance,” says Williams. “The fear is real.”
Addressing the problem is a crucial step, say housing experts.
“Shining a brighter spotlight on discriminatory appraisals and providing more standardization and guidance to provide more transparency to the process could go a ways toward improving the process,” says Realtor.com® Senior Economist George Ratiu. “There’s no guarantee it will change, but talking about it will push us in the direction we want to go.”
He also believes the federal government’s plan to offer tax credits to encourage developers to rehabilitate existing homes and put up new housing in lower-income communities could lead to results. This lessens the financial risk to these companies of spending more on erecting new homes than they can fetch on the market if the tax credit covers the difference.
This is “a worthwhile effort,” says Ratiu. “It’s been a problem for decades.”
Racial equity has been a focus of Biden’s administration. Soon after taking office, he issued orders to advance racial equity and directed federal government agencies to fix policies that hurt communities of color. He also acknowledged that federal, state, and local governments were directly involved in creating racist housing policies that are still hurting Black Americans today.
In his budget proposal last week, Biden proposed creating a $100 million initiative to provide increased down payments for those seeking to move into wealthier communities. This could help borrowers who receive Federal Housing Administration loans come up with down payments of up to 10%.
Biden also plans to provide more funding for fair housing education and enforcement. He also intends to create and preserve more affordable housing and provide more low-income renters with housing vouchers.
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