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A Black homeowner had her white friend represent her during an appraisal. The value of her home shot up by $149,000.

Business Insider logo Business Insider 5/17/2021 asheffey@businessinsider.com (Ayelet Sheffey)
a sign on the side of a building: FREDERIC J. BROWN / Contributor/Getty Images © FREDERIC J. BROWN / Contributor/Getty Images FREDERIC J. BROWN / Contributor/Getty Images
  • The Indianapolis Star reported that appraisers undervalued a Black resident's home because of her race.
  • This undervaluation dates back decades to when Black neighborhoods were deemed financially risky.
  • Lawmakers introduced legislation in recent months to combat racial disparities in homeownership.
  • See more stories on Insider's business page.

With the pandemic-era ability to work from home, the desire for homeownership has been on the rise this past year, with a housing inventory crisis developing as a result.

But the Indianapolis Star reported last week that Black homeowners who want to put their houses on the market or seek lower mortgage rates are at a disadvantage just because of their race.

The Star spoke to Carlette Duffy, a Black homeowner who had sought three appraisals on her home to start the process of refinancing her current mortgage loan. The first two appraisers valued it at $125,000 and $110,000, respectively, but when she had a white friend stand in for her during a third appraiser's visit, the value of her home shot up to $259,000. She had suspected the appraisers were lowballing her because of her race, and she was right.

"I had to go through all of that just to say that I was right and that this is what's happening," Duffy told the Star. "This is real."

Duffy and the Fair Housing Center of Central Indiana filed complaints against the mortgage lenders and appraisers, accusing them of undervaluing her home because of race with the Department of Housing and Urban Development (HUD), and her case is now in the hands of the government.

Duffy's situation is far from unique. A 2018 study from Brookings found that homes in Black neighborhoods are undervalued by $48,000 on average, amounting to $156 billion in cumulative losses.


Video: Indianapolis homeowner had white friend stand in for appraisal, home value doubled (USA TODAY)

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"That metric shows there's racism in the housing market," Andre Perry, a fellow at the Brookings Institute, told Insider last year. "There's something going on in the practices and policies of appraisals, real estate agent behavior, and lending."

Insider previously reported that Black Americans lag behind white Americans on homeownership, with Black people being denied mortgages at higher rates than white people, even though many are credit-worthy.

And studies have shown that there's a long history of structural racism is the housing market, significantly setting back Black homeowners. A study from the Center for American Progress (CAP) found that federal, state and local policies have prompted housing discrimination through tactics to prevent Black Americans and Americans of color from building wealth through homeownership.

For example, President Franklin Delano Roosevelt's Home Owners' Loan Act and the National Housing Act in the 1930s had the goals of making homeownership more affordable, but when determining which neighborhoods would get guaranteed mortgages, the Home Owners Loan Corporation denied Black people access to mortgage loan refinancing "while perpetuating the notion that residents of color were financially risky and a threat to local property values," CAP said.

That's why lawmakers, led by Rep. Emmanuel Cleaver II of Missouri, introduced the Real Estate Valuation Fairness and Improvement Act in April to combat disparities in the real estate appraisal industry.

"Homeownership has traditionally been the primary way that Americans accumulate wealth," Cleaver said in a statement. "High-profile cases of homes owned by people of color being devalued in comparison to homes owned by their white neighbors have renewed calls for federal action."

The bill would create task forces comprised of civil rights advocates and industry representatives to respond to racial disparities in real estate valuations, and it follows a March letter from 35 lawmakers calling on the Federal Financial Institutions Examination Council to take action on housing discrimination.

Duffy told the Star that she wants justice and hopes that HUD will address discriminatory housing practices.

"I'm excited, vindicated, relieved, angry, extremely peeved since I can't say the other expletives that were running through me at that point in time - destroyed that I had to go through all of that," she said. "This is real ... just being able to prove it is the hard part."

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