The Black Tax: Race and Housing

BIRMINGHAM, Ala. (WBRC) - John Eppenger, a retired Bellsouth manager, says he and his wife wanted the lot across from Hoover’s high-profile Ross Bridge neighborhood because it was flat and lended itself to single-level living, despite being in a subdivision named Mountain Ridge. But after buying the lot in 2017, their plans to build their new home were temporarily flattened when the bank handling their construction loan ordered an appraisal that came back at $250,000.

“This area is located in Birmingham, but it’s got a Bessemer zip code and I think because of that Bessemer zip code he may have might have underevaluated the cost of this property” Eppenger said

Eppenger filed a complaint with HUD, which said it found no discrimination. Later that year, a second appraisal of $307,000 allowed the Eppengers to build the three bedroom, 2.5 bath home with formal living and dining rooms, a great room, upstairs bonus room and deck, which has since appraised for $337,000. “Good neighbors, quiet community, convenient to the mall shopping and grocery store, so we’re happy here”, said Eppenger sitting in his dining room.

On its own, Eppenger’s situation may not sound alarming, until one starts looking at stories from around the country about people of color or interracial couples whose appraisals jumped tens or even hundreds of thousands of dollars when a white spouse or friend let the appraiser in.

Marcus Brown, Board Chair of the Birmingham Realtist Association, says when a black family is putting a home up for sale there is a sometimes uncomfortable conversation that must be had, even in a hot real estate market. “Whether it be pictures, whether it be other decor or things in the home that indicate that a black family lives there, there are concerns in 2021 as to whether or not they’re going to be treated fairly based on the home and whether they’ve maintained it and whether it has appreciated in value”, said Brown.

Economists at Zillow say the disparity between the home values of white homeowners compared to Black and Latino homeowners nationally is around 16% and 10% respectively. While Zillow show gaps as low as one or two percent in cities that have experienced growth in recent decades, Zillow puts the gap for Birmingham at 43%. That can put the wealth of many families of color looking to use equity to improve a home, start a business or send a child to college, in a precarious situation. “If a black homeowner goes out and their appraisal comes in too low they’re getting locked out of some of these savings from the low interest rates and some of the wealth-building opportunities of homeownership” said Jeff Tucker, a senior economist at Zillow.

Late last year, sociologists Junia Howell, Ph.D and Elizabeth Korver-Glenn, Ph.D, published a study arguing that over 40 years after congress outlawed redlining, the continuing practice of calculating a home’s value based on sales of homes in that same neighborhood perpetuates discrimination. “We outlawed the explicit use of race and the explicit use of those maps in determining how much a home should be worth and how risky an investment it was. However, we continue to use the practice that they put in place in the 1930s which is using comparable sales or past sales to determine how much a current house should be worth” said Howell, an associate professor at the University of Pittsburgh, who adds this is not just a problem for people of color. “The broader inequality that this is creating is hurting us all. It led to in many ways the housing crash in 2008 which we all saw had detrimental impacts across our whole economy on our whole society, and we have rebounded in various ways in the housing market, but sadly because we haven’t really dealt with some of these underlying mechanisms of appraisal inequality we are actually seeing even larger racial inequality in appraised values post-housing crash than before.” A look at median home prices in Birmingham, Homewood and Hoover shows how dramatically Birmingham prices have lagged over just the last 20 years.

About the current discussion around appraisals, Janet Hamm, 2021 President of the Greater Alabama Multiple Listing Service (GALMLS) said, “We acknowledge that this can be a problem in our industry, however as leaders of the Greater Alabama Multiple Listing Service, we are firmly committed to protecting the dream of homeownership for all. As part of this commitment, we are stead-fast protectors of our Code of Ethics and Fair Housing. Should one of our realtors or MLS subscribers not uphold the standards for which we advocate, they can be held accountable by their peers and consumers through our professional standards programs.”

The Appraisal Institute, the country’s largest association of real estate appraisers says it is paying attention to what’s going. It’s president, Rodman Schley, released a statement saying: “When we see even one story of a consumer who feels they were treated differently because of their race, it’s very concerning because that goes against everything we stand for. 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 are reviewing various bodies of research that have looked at the way appraisals work and outcomes. The question is whether there is a better way of valuing property that maintains objectivity while not inadvertently introducing new problems for the very consumers for whom we’re trying to ensure equity.

We are currently developing additional process guidance to curb potential bias in appraisals, as well as reinforcing ethics, education and training. We are enhancing our Code of Professional Ethics and exposing practitioners to new research and areas of study on unconscious bias and historic and structural discrimination in housing and real estate. And we are backing policy solutions that advance equity related to appraisal, fair housing and equitable mortgage solutions, alongside consumer groups, real estate brokers and agents, banks, government agencies and others.”

Schley continues, “Over the last two years, the Appraisal Institute has been amplifying and accelerating internal initiatives and partnerships to bring about positive change, including improving diversity within the profession through the Appraisal Diversity Initiative in collaboration with Fannie Mae and the National Urban League, and with our Minorities and Women Course Scholarship from the Appraisal Institute Education and Relief Foundation. There is more to do, and this work is a priority for the Appraisal Institute this year It would appear, greater diversity is something Appraisal Institute membership could benefit from.”

A.I.’s most recent snapshot of their own membership shows 85% are white, nearly 80% are men and 70% percent are age 50 or above. Also, more than 40% Appraisal Institute members earned more than $100,000 in 2019.

While Howell and other advocates are working with the Appraisal Institute to change things within the industry, Dedrick Asante-Muhammad of the Institute for Policy Studies suggests working to increase black home ownership which he says is currently at just over 40%. “What you can do is you can make sure you’re investing public assets like clean streets, safe streets, recreation, good schools in black neighborhoods so there’s little reason to discriminate against these homes outside of racial prejudice” said Asante-Muhammad.

Meanwhile, as a city with a rising national profile trying to keep and compete for talent, there is incentive for Birmingham to do better. “Birmingham is a really affordable place to move to start a family and at the moment, that is one of the biggest challenges, one of the biggest considerations for the millennial generation that’s got this wave of people and disproportionately a wave of young minority folk compared to the baby boomers”, said Tucker.

John Eppenger, baby boomer and happy homeowner with the lyrics to “I Surrender All” framed in his great room, reminds younger black homeowners and home-seekers to continue the fight and keep the faith.

“We have to still persevere and move on”, Eppenger said. “Rise above whatever is thrown at you, put it in the hands of the Lord and keep going”

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To learn more about the Howell/Korver-Glenn research click here.

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