Legacy of redlining: Homes in minority neighborhoods undervalued

Carolyn and Larry Williams Sr. have spent tens of thousands of dollars fixing up their home over the years but its resell value is much less than it likely would be in another neighborhood.
Caption
Carolyn and Larry Williams Sr. have spent tens of thousands of dollars fixing up their home over the years but its resell value is much less than it likely would be in another neighborhood.

Credit: Jordan Laird

Credit: Jordan Laird

Homeowners in minority neighborhoods don’t see same gains, even in booming market.

The booming housing market is leaving many homeowners in minority neighborhoods behind as their homes continue to be valued unfairly low, advocates say.

Homeownership is viewed by many as the key to closing the large racial wealth gap in the U.S. But because metro areas like Dayton are still extremely segregated and homes in minority neighborhoods are devalued, homeownership there isn’t the same engine for building wealth as in other communities, local realtists say.

Realtists are members of the National Association of Real Estate Brokers (NAREB), a group of mostly minority real estate professionals who promote fair housing, fair lending and fair valuations.

“There are appraisers that look at certain neighborhoods and they’re going to devalue the neighborhood if they think it is a predominantly minority area,” said Veronica Bedell-Nevels, a Dayton-area real estate broker who is Black and president of the Ohio Realtist Association.

Bedell-Nevels said she tells her clients of color to be out of the house when an appraiser comes.

“Prepare your home, where the appraiser will be focused on the quality of the home and not have reason to consider who lives there,” she said. “If you want your value, do not let them see you.”

Bedell-Nevels pointed to an egregious example from earlier this year in Indianapolis where a Black homeowner had a white friend stand in for a third house appraisal and her home value nearly doubled (it jumped from $125,000 to $259,000).

But there is little homeowners can do to obscure the racial makeup of their neighborhoods.

Nikol Miller, executive director of the Miami Valley Urban League, said low appraisals mean homeowners of color are less able to use tools homeownership should provide to stabilize and grow their wealth. Those include borrowing against their home to start a business or selling at a profit to increase wealth and move onto a bigger home.

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The Dayton Daily News Path Forward project investigates the most pressing issues in our community, including race and equity. This story examines how homes in local minority neighborhoods are valued less than comparable homes elsewhere, and the effect that has in preventing residents of color from building equity and closing the vast racial wealth gap.

Carolyn and Larry Williams Sr. have spent tens of thousands of dollars fixing up their home over the years but its resell value is much less than it likely would be in another neighborhood.
Caption
Carolyn and Larry Williams Sr. have spent tens of thousands of dollars fixing up their home over the years but its resell value is much less than it likely would be in another neighborhood.

Credit: Jordan Laird

Credit: Jordan Laird

The value of a neighborhood

Carolyn Williams bought her home in the Westwood neighborhood in West Dayton in 1987 for $18,000 — about $41,000 in today’s dollars when adjusted for inflation. She also received a loan from the U.S. Department of Housing and Urban Development to fix it up.

In the decades since, she and her husband Larry Williams Sr. said they have poured over $40,000 into improvements, including installing a new roof, refurbishing the kitchen, finishing the basement, installing new windows and putting in a second bathroom.

In 2020, the Montgomery County Auditor’s Office valued their home at $43,580 and Larry Williams Sr. said he doesn’t believe he would get much more than that if he listed the house for sale. As of Wednesday, Zillow.com estimates the Williams’ house is worth about $63,100 and Redfin.com estimates the home is worth $38,517.

“Our investment has been a negative investment and that shouldn’t be,” Larry Williams Sr. said. “It’s hard to swallow.”

The couple said they may have moved into a nicer home if their house value had ever appreciated and they’re disappointed they won’t be able to leave much to their kids and grandkids.

Carolyn and Larry Williams Sr. have spent tens of thousands of dollars fixing up their home over the years but its resell value is lower than what they've put into the home.
Caption
Carolyn and Larry Williams Sr. have spent tens of thousands of dollars fixing up their home over the years but its resell value is lower than what they've put into the home.

Credit: Jordan Laird

Credit: Jordan Laird

He said the lack of amenities in the area, including no grocery store, likely plays a role in the home values in the neighborhood. Frederick Diggs, a local realtor who is Black and past president of the Greater Dayton Realtist Association, said that’s an issue that impacts most of West Dayton, where most of the majority-Black neighborhoods are.

And since it costs more to fix up a home in West Dayton than some owners could likely sell it for, there’s little incentive to buy a home there and the majority-Black neighborhoods continue to stagnate or decline, Diggs said.

Bedell-Nevels said appraisers often value homes in minority neighborhoods for less than they’re worth because of prejudice.

According to a 2018 report by the Brookings Institution, differences in home and neighborhood quality do not fully account for the lower valuations of homes in Black neighborhoods. The report found that in the Dayton metro area, homes of similar quality in neighborhoods with similar amenities were on average worth 23% less ($14,668 per home) in majority-Black neighborhoods compared to those with few or no Black residents. Researchers looked at neighborhood characteristics like the quality of the public schools, number of restaurants and access to jobs as measured by mean commute time.

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The effects of racist housing policies linger

Miranda Wilson, director of investigations and enforcement at the Miami Valley Fair Housing Center, said the Williams’ story is a familiar one and a legacy of historical racism.

“Families like the Williams invest all these resources into their house, but they’re not able to get an appraisal that is comparable to what they put into it so they’re never going to be able to sell it for what they put into it because of all these other conditions in the area that are based on historical discrimination,” she said.

Montgomery County Auditor Karl Keith said the Williams’ story is not unique.

“There’s just no denying that historically there are factors in the real estate market that have been discriminatory towards different minority groups in the community and that’s had a long-term impact on the ability for them to market their homes, to accumulate wealth, all of those things,” he said.

Policies like redlining (systematically denying loans or charging higher interest rates in minority neighborhoods) and racial covenants (writing into the deed of a property what race a buyer could be) were banned by the Fair Housing Act in 1968. But the law did not readjust housing prices in segregated neighborhoods.

ExploreUndesign the Redline: exhibit about Dayton housing segregation comes to area

Today, the way appraisers value homes — by looking at what similar nearby homes sell for — perpetuates the impact of previous racism in home pricing, Wilson said.

“It’s inherently cherry-picking this house versus that house,” Wilson said. “That is so subjective and that’s how you end up with appraisals that are vastly different. And there isn’t any recourse in the system. All you can do is get another appraisal and hopes it turns out better.”

How to bring up home values in minority neighborhoods

On top of working with community members on improvements and amenities they’d like to see, area housing advocates want a fairer appraisal system.

“One, appraisers are not a diverse bunch, so improving diversity of the appraisers themselves is a big part of that because there’s conscious and unconscious bias,” Wilson said.

There are fewer than 80,000 active real estate appraisers in the U.S., of which about 85% are white and about 1% are Black, according to 2019 data from the Appraisal Institute, the country’s largest professional association of real estate appraisers.

Wilson said there also needs to be a more uniform, less subjective appraisal system as well as a mechanism for disputing appraisals.

“The appraisers should get it together and reduce the bias within their industry,” she said. “But I think we also need for the government to step in and do that because there needs to be accountability and because the government is also the ones that helped create these problems in the first place.”

When Keith’s office did its 2020 reappraisal for tax purposes, his employees and contracted workers were required to attend training on implicit bias.

“There is a certain degree of subjectivity that comes to play in property appraisal work,” Keith said. “This training helped members of my staff and the appraisers who participated to recognize those subjective biases that may impact their decision-making without even knowing it and how they can overcome those biases.”

Appraisal Institute President Rodman Schley said appraisal groups are working with consumer groups, real estate brokers, banks and government agencies to explore housing inequities’ causes and solutions.

“When we see even one story of a consumer who feels they were treated differently because of their race, it’s very upsetting because that goes against everything appraisers stand for,” Schley said in an emailed statement. “Appraisers take a lot of pride in being an objective source of real estate value information. We look at the numbers and facts and mirror what the market tells us. … We believe efforts, such as the HUD interagency task force created by the Biden administration, should include adjoining mortgage processing issues such as lender reconsideration of value and appraisal appeal processes, as well as creative approaches to financing underserved markets.”

The Appraisal Institute is working with The Appraisal Foundation, the profession’s standards-setting body, to improve standards and qualification requirements related to unconscious bias. The Appraisal Institute is also developing a five-hour course focused on unconscious bias in appraisal and previously updated its “Guide to Professional Ethics” to explicitly safeguard protected classes.

The organization offers a scholarship for minorities and women.