Skip Navigation

View more stories from our 2021 Annual Report

As racial disparities in homeownership remains one of the biggest contributing factors to the wealth gap, Reinvestment Fund is illuminating the role of racial bias in home appraisals and its contribution to that gap. 

The COVID-19 pandemic has magnified the existing inequalities in American society today, including the racial wealth gap. An appraisal, which plays a crucial role in buying, selling or refinancing a home, determines for the buyers, sellers, refinancers, and lenders how much a home is worth. Unfortunately, racial disparities have long affected property valuations, assessments, and appraisals, which has contributed to a large gap in homeownership between Black and white Americans. In 2020, 70 percent of white families own their homes, compared to just 42.4 percent of Black families and 48.6 percent of Latino families. In a country where homeownership remains strongly linked to generational wealth building, an unbiased appraisal truly matters. A low appraisal can have a significant impact on one’s ability to get a mortgage (or the terms under which that mortgage is obtained) or can limit the ability to use the stored wealth in the home for important life events (e.g., pay for a college education). In short, a biased appraisal has a direct impact on the wealth gap observed between various racial groups.

Ira Goldstein, President of Policy Solutions at Reinvestment Fund, along with Gregory Squires, Professor of Sociology and Public Policy and Public Administration at George Washington University, have helped shine a light on this issue. In partnership with Philadelphia City Councilmember Cherelle L. Parker, they have pointed out the extraordinary lack of diversity in the appraisal industry and worked to try to understand the role that appraisals play in the larger landscape of homeownership. Parker has held public hearings, gathered testimony, and created a task force to address the issue locally. Reinvestment Fund leads the task force, which expects to issue a report in Summer 2022. While it remains clear that there are appraisal issues here in Philadelphia, there are several contributing factors that keep non-white individuals from receiving fair valuations.

As a result of the COVID-19 pandemic and a continued housing shortage, property values have risen drastically. For many people, their home is their largest investment yet, many Black Americans continue to receive low appraisals. This kind of inequality is rooted in America’s history of redlining and credit discrimination.  Redlining by banks and insurance companies contributed to the segregated patterns of many cities. This, together with certain zoning rules and racially restrictive covenants in deeds – along with early guidance of the appraisal industry itself – created and reinforced segregated neighborhoods. While redlining has been outlawed, its legacy lives on. Commenters on the issue of racially biased appraisals note that the impact of the history of discrimination in the housing and mortgage markets gets “baked into” contemporary appraisals.

More generally, as it relates to racially disparate property valuations, according to a recent Brookings Institution study, a home in a Black neighborhood is valued 23 percent less than a similar home in a white neighborhood. This has resulted in over $165 billion cumulative losses for Black homeowners. Redfin also recently released a study of more than seven million home sales between 2013 and February 2021 showing that comparable homes in Black and white areas are valued at $46,000 less in the Black areas. For Philadelphia, the city’s undervaluation was estimated to be $25,623, equating to a 27 percent undervaluation.


For many people, their home is their largest investment yet, many Black Americans continue to receive low appraisals.

Several explanations have been offered for appraisal bias. The possibility of bias is often higher when an appraiser is from a different neighborhood or of a different race or ethnicity than the homeowner or local residents. As a result, there can be wide variations and inaccurate estimates of a property’s true value. While the majority of appraisers are white, the race, age, and gender demographic composition of the appraisal industry has received little attention, until recently, as one of the drivers of racially biased appraisals. For appraisers, the industry itself tends to be homogeneous and experiences little turnover. A recent study shows that 85 percent of appraisers are white, and 77 percent are male, with 70 percent of appraisers having worked in the profession for over a decade (Reed, 2022). Lack of experience working in Black neighborhoods and communities coupled with having little knowledge of Black homeownership significantly contributes to the undervaluation.

As appraisal bias continues to have a detrimental effect on many Black homeowners, policy discussions about solutions to help combat this issue are on the rise. This includes consumer education, appraiser training and vetting, rethinking how appraisals are conducted, and raising the level of transparency in appraisal activity (like Congress did in mortgage lending through the 1975 passage of the Home Mortgage Disclosure Act). Creation of a standardized curriculum (including fair housing training) for appraisers, along with reforms to the field experience requirements, could also help reduce appraisal bias and make this line of work more accessible to a more diverse group of appraisers. As more cities implement a more inclusive hiring and contracting process, systems can be put into place that help identify appraisers of color or appraisers who have a history of serving communities of color.

This work is helping to recognize the factors and policies that have led to the racial wealth gap today as well as highlight the need for change in this process for buyers, sellers, refinancers, and lenders alike. In Philadelphia, both the process put in place by Councilmember Parker as well as the upcoming report, will help push a variety of policy interventions focused on reducing appraisal bias, opening up the profession, and increasing the transparency of the appraisal process. By aiming to end discrimination in appraisals, potential buyers and sellers can benefit from such changes and help create more positive outcomes for all.

Find out more about our Housing research here.

Latest Insights

News May 23, 2024

Two Atlanta-based Developers are Joining Forces to Preserve Affordable Housing  

Impact Story May 21, 2024

Weavers Way Co-op in Germantown

News May 13, 2024

Reinvestment Fund Spring Newsletter