Home appraisals are biased. Here’s how to tackle this problem in Philly.

We’ve all seen the stories about Black homeowners who obtained higher appraisals once they “whitewashed” their homes by removing family photos, African American art, and other evidence that a nonwhite family resided in the home. Unfortunately, home appraisal bias has become a leading fair housing issue in recent years, both across the nation and in Philadelphia. These racial disparities in home appraisals then contribute to broader disparities we see in generational wealth between Black and white families.

On April 26, 2021, City Council held a public hearing on appraisal bias. Witness after witness (appraisers, Realtors, academics, industry representatives, and others) testified to the variety of issues that impact the fairness, transparency, and quality of home appraisals. We then formed a task force of practitioners and experts that convened several times over the past year. Concurrently, the federal government’s Property Appraisal and Valuation Equity (PAVE) interagency task force, created by President Joe Biden, was formed and coled by Housing Secretary Marcia Fudge and domestic policy adviser Susan Rice. PAVE issued its report in March.

» READ MORE: Education and transparency can help eliminate racial bias in home appraisals, a Philly task force says

The Philadelphia Home Appraisal Bias Task Force just released its report, which offers recommendations and actions at the city level. For instance, we suggest making the appraisal process more transparent so that biases can be spotted and addressed, educating appraisers and homeowners about appraisal bias, and hiring a more diverse group of home appraisers.

Still, we recognize there are actions only state government can take because, in part, professional standards are set at the state level. And there are things that, uniquely, the federal government can do (e.g., modernize how the appraisal industry is governed). But while the city’s powers are limited in certain areas, it’s most certainly going to be the cities around the country that motivate the states and federal government — and the industry itself — to act.

“It’s most certainly going to be the cities around the country that motivate the states and federal government — and the industry itself — to act.”

The Philadelphia effort, if nothing else, should be a call for action to other cities to form a group like ours, engage in fact-finding and policy discourse, and push for change.

As much as we tried to get to the bottom of the problem, we were hampered by a lack of comprehensive data on appraisals. We must create a database for appraisers modeled on the federal Home Mortgage Disclosure Act (HMDA), which requires most home lenders to report detailed information on the location, terms, and conditions of their loans. This policy has helped correct decades of bias in mortgage lending, which shut out many Black families from purchasing homes and increased financing to traditionally underserved areas. A similar rule for appraisers would require them to publicly report the census tract, appraisal amount, other appraisal details, and the ultimate sale price of homes for all appraisals. If the federal government does not take such action, cities could do so at the local level. This would facilitate identification of responsible appraisers and enable cities to develop lists of preferred appraisers, similar to the way many identify women- and veteran-owned contractors, as well as those owned by people of color.

» READ MORE: Homes in Black neighborhoods are valued less than similar homes in white areas

The Philadelphia report also offers recommendations to the state regarding education and licensing requirements, since Pennsylvania requires some standards that go beyond federal requirements. These additional requirements do not necessarily enhance the skills of appraisal professionals but make it more difficult for people of color to achieve professional licensing. For example, becoming an appraiser in Pennsylvania requires that the mentor must go with their mentee for 300 of their 1,500 training hours, something not required at the federal level. Mentoring is a burden on licensed appraisers, who are not compensated for this work. Consequently, it encourages recruitment of friends and family members, thus discouraging access for those not historically connected to the profession (i.e., groups that are disproportionately nonwhite).

Philadelphia has a history of leading on fair housing and consumer issues. In 2010, Philadelphia passed one of the toughest anti-predatory lending bills. Through local court and administrative leadership, with the cooperation of the lender and consumer bars, we created the Residential Mortgage Foreclosure Diversion Program, which has saved thousands of people from unnecessary foreclosures since it opened in 2008. Both drew attention across the country; other communities saw our impact and replicated our actions.

We hope the same thing happens with our work to reduce appraisal bias. Other communities should create groups to take constructive action and encourage their states and the federal government — along with the industry itself — to fix these pervasive problems.

Cherelle L. Parker is majority leader and represents Philadelphia’s 9th Council District. Gregory D. Squires is a research professor and professor emeritus in sociology at George Washington University. Ira Goldstein is president of the policy solutions group at Reinvestment Fund.