Illinois considers bill to address racial bias in home appraisals

Lowball Ratings of Black-Owned Homes are “directly linked to disinvestment, poverty, and disinterest” in majority-black communities, said Rep. Lamont J. Robinson, D-5e, one of five sponsors of the bill.

“We need to figure out how we can have parity in ratings in communities like Chatham, Englewood, Washington Park and Woodlawn,” said Robinson, whose district runs through a wide swath of the South Side to 79th Street.

Home appraisals establish the value of a property, a number that lenders use to determine how much mortgage they will provide on the property.

The Biden administration has already a federal task force studying property assessment and assessment equity issues, or PAVE. Mortgages are federally regulated, while the appraisal industry is subject to state licensing.

In recent years, many scholarly studies and the news demonstrated that racial bias is a strong contributor to lower home value assessments on Black homeowners’ properties.

In October, Illinois Realtors released a study that showed “there is a significant relationship between race and whether someone is misjudged,” as one of the study’s authors told Crain’s. at the time.

Representatives from the banking and rating industries both endorse the idea of ​​a state panel on racial bias.

Jody Bishop, president of the Chicago-based Evaluation Institute, a Chicago-based national association, said in a prepared statement that the group supports the plan and expects the task force to “ensure that all stakeholders in the appraisal ecosystem are represented through the appointment of professional real estate appraisers as members.

The issue of racial bias “definitely needs to be addressed,” said Ben Jackson, executive vice president of government relations for the Illinois Bankers Association. “Many (people) are concerned that prejudice and discrimination are embedded in mortgages.”

In February, Lending Tree published the results of an investigation which found that approximately 58% of black homeowners believed they had been underestimated in an assessment, based at least in part on their race, sexual orientation, or other protected demographics. That’s compared to 14% of white owners.

Not everyone agrees that racial bias is rampant in the appraisal industry. The authors of a 2019 statistical study by the American Enterprise Institute concluded that “contrary to media claims, racial bias among reviewers is rare and not systemic”.

It’s impossible to know now what a task force will end up recommending, but two possibilities that are often discussed in the industries are:

  • Move to a more computerized model of home valuation, to reduce the interference of personal biases.
  • Enact changes in appraiser licensing standards that would encourage more people of color to enter the business. New evaluators are required to apprentice with seasoned evaluators, which some observers say tends to perpetuate similarity in the business as seniors bring in the juniors they would like to work with.

The Evaluation Institute is a partner of the Reviewer Diversity Initiative, an effort to attract more non-whites into the profession.

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