TAKING AIM AT APPRAISAL BIAS
The president is launching a first-ever interagency effort to address “home appraisal inequities” and recommend rules to “aggressively combat housing discrimination.”
President Joe Biden traveled to Tulsa, Oklahoma, this week to honor the 100th anniversary of the Tulsa Race Massacre, an infamous event where a Black business district, nicknamed Black Wall Street, was razed and hundreds of people killed.
Biden spoke of planned efforts to combat racial inequities, and he focused on the housing market and boosts for Black-owned businesses. A media release (Opens in new tab.) put out by the White House provided an overview of each initiative:
Housing market: Biden will “take action to address racial discrimination in the housing market, including by launching a first-of-its-kind interagency effort to address inequity in home appraisals, and conducting rulemaking to aggressively combat housing discrimination.”
Black-owned businesses: Biden plans to “use the federal government’s purchasing power to grow federal contracting with small disadvantaged businesses by 50%, translating to an additional $100 billion over five years, and helping more Americans realize their entrepreneurial dreams.”
“The horrific acts of violence and property destruction that occurred in Tulsa 100 years ago and the subsequent public and private policies that frustrated the recovery of ‘Black Wall Street’ help illustrate why racial wealth gaps persist in America today,” said National Association of Realtors® (NAR) President Charlie Oppler in response to Biden’s announcement. “We commend the Biden Administration for its commitment to closing the gap, specifically by focusing on the intergenerational wealth building opportunities offered by property and homeownership.”
Housing market proposals
Biden issued a memorandum during his first week in office directing the Department of Housing and Urban Development (HUD) to address discrimination in the housing market, and this week’s announcement is the result of that effort. HUD has now sent a proposed rule and proposed interim final rule to HUD’s authorizing committee in the Senate and the House of Representatives for review. They will be published in the Federal Register next week.
According to the White House, those rules will “provide the legal framework for HUD to require private and public entities alike to rethink established practices that contribute to or perpetuate inequities.”
Appraisals: Biden says a Brookings study (Opens in new tab.) in 2018 found that “homes in majority-Black neighborhoods are often valued at tens of thousands of dollars less than comparable homes in similar – but majority-white – neighborhoods,” and that the “crisis is worsening.”
In this week’s announcement, Biden said he asked HUD Secretary Marcia Fudge to create a first-of-its-kind interagency to address home appraisal inequities. He said the goal is to use “the many levers at the federal government’s disposal,” including:
Potential enforcement under fair housing laws
New standards and guidance created in partnership with industry and state and local governments
“NAR is particularly encouraged by the administration’s most recent efforts to address inequities in the home appraisal process (Opens in new tab.), and we support a thorough review of the current appraisal system alongside both public and private stakeholders,” says NAR’s Oppler. “We look forward to working with White House and HUD on other upcoming rulemakings that seek to more effectively combat housing discrimination and redress the legacy of residential racial segregation.”
Biden also outlined proposals that would impact the overall housing market, including:
New Neighborhood Homes Tax Credit: The American Jobs Plan calls for this tax credit to attract private investment for affordable housing for low- and moderate-income homebuyers. These tax credits will increase homeownership opportunities and asset-building for underserved communities, reduce blight and vacant properties, and create thousands of good-paying jobs. The Neighborhood Homes Tax Credit would, if passed:
Encourage investment in homes that cost more to redevelop than they can sell for on the open market. The White House says that about 40% of the U.S. housing stock is at least 50 years old, and more than 15 million properties are vacant as families struggle to find affordable housing. Under the tax credit program, each state’s housing finance agency would award tax credits to project sponsors – developers, lenders or local governments – through a competitive application process. Sponsors would use the credits to raise investment capital for their projects, and the investors could claim the credits against their federal income tax when the homes are sold and occupied by eligible homebuyers.
Bolster homeownership rates for low- and moderate-income homebuyers in underserved communities and protect against gentrification. Homes located in census tracts with poverty rates of at least 130% of the area poverty rate, median family income below 80% of area median income, and median home values lower than the area median value are eligible for the credit – about 1 in 4 census tracts nationwide. Homes redeveloped using the credit may only sell for four times the area median family income, and homebuyers cannot have incomes exceeding 140 percent of the area median family income.
Incentivize an end to exclusionary zoning to expand housing choices: In Biden’s American Jobs Plan, he asks Congress to enact the Unlocking Possibilities Program, a $5 billion competitive grant that awards flexible and attractive funding to jurisdictions that take steps to eliminate barriers to affordable housing and expand housing choices for people with low or moderate incomes.
Source: Florida Realtors®