Disparity in Home Values Grows Between Whites, Minorities
November 2, 2020
The differences between home values in white neighborhoods and minority neighborhoods is larger than it was 40 years ago, according to a new study published by the Oxford University Press. The appraisal gap between these neighborhoods has doubled since 1980. The difference between the average home appraisal in neighborhoods that are predominantly white and those that are majority Black and Latinx was $164,000 in 2015, according to the study. In 1980, the difference was $86,000.
Researchers say appraisers’ use of the “sales comparison approach”—when homes are priced based on what comparable properties in the same neighborhood sold for—may be contributing to the widening of the gap. The sales comparison approach can result in appraisers valuing homes based on pricing that was made before fair housing laws took effect in the 1960s and 1970s, researchers say. “Without adjusting the price, you literally baked into the system the racialized element and continued it,” Junia Howell, co-author of the study and assistant professor at the University of Pittsburgh, told the website Grow, produced by CNBC.
Bryan Greene, director of fair housing at the National Association of REALTORS®, adds that most appraisers are “genuine” when they say they are not looking at the racial composition of a neighborhood when assessing home values. They evaluate market conditions. “But if race is baked into market conditions, everyone can disavow blame for a big problem,” he says. “Everyone can say they are innocent, but there remains a big systematic problem.”
In the Oxford study, researchers used a model that shows in neighborhoods where Black and Latinx populations have increased by 1% a year, the average appraised value of homes dropped by $22,000 between 1980 and 2015. On the other hand, the average appraised home value in neighborhoods that became predominantly white at the same rate increased by $73,000.
Property values have long been tied to wealth. The study notes that because homes in majority Black and Latinx neighborhoods are being priced lower than homes in majority white neighborhoods, minorities have gained less wealth in the past 50 years as a result.
“Race Affects Home Values Even More Now Than it Did in 1980, Study Finds,” Grow by CNBC (Oct. 28, 2020) and “The Increasing Effect of Neighborhood Racial Composition on Housing Values, 1980-2015,” Oxford University Press/Society for the Study of Social Problems (Sept. 4, 2020)
Updated: November 25, 2020