The report analyzed 7.3 million homes in Black neighborhoods. It considered such factors as home size, condition, neighborhood amenities and schools.
“Our analysis rules out all the factors that are typically associated with home value and still finds a significant difference between the values of nearly identical homes in similar Black and white neighborhoods,” Reginald Edwards, a senior economist for Redfin, said in the study. “Today’s Black homeowners are missing out on wealth due to racist housing policies that were outlawed in the 1960s.”
Chicago’s $56,537 represented an undervaluation of 40 percent in Black neighborhoods, the 18th-highest percentage among the list of cities.
The biggest dollar undervaluation was in New York, at $263,462. The biggest percentage undervaluation was 86 percent in Buffalo, N.Y.
The survey found that homes in Black areas in Pittsburgh, Houston and Fort Wayne, Ind., were overvalued compared with those in white neighborhoods. There was no statistically significant value difference in nine cities, according to Redfin.
“Homes in majority-Black parts of Chicago are valued lower, and the cycle set in motion by policies like redlining make it tough to equalize home values,” Arnell Brady, a Redfin mortgage adviser, said in the study. “There’s simply a perception that a home in mostly Black Bronzeville, for example, is worth less than a home in Lincoln Park, which is mostly white.”
As part of the study, the sale of two similar homes on the South Side was analyzed. Both were 1,300 square feet with three bedrooms and two bathrooms. The one in Beverly View, a predominantly Black neighborhood, sold for $172,000 in November 2017, while the other home in Beverly Hills, a predominately white neighborhood, sold for $217,500 in July 2016, according to the study.
Such gaps could be attributed to institutional racism, according to Karen Freeman-Wilson, president and CEO of the Chicago Urban League.
“There is an inherit bias when it comes to assessments of homes in Black neighborhoods and this is nothing more than institutional racism,” Freeman-Wilson said. “Black and white neighborhoods have not received the same investments from banks, developers and local governments and that is a big reason why property values differ so much in minority neighborhoods.”
To combat these disparities, Courtney Jones, executive director of the nonprofit Black Coalition for Housing in Chicago, said more Black appraisers are needed.
“It is my belief that white appraisers intentionally undervalue homes in Black neighborhoods. It’s very difficult for folks who have not grown up in these neighborhoods to really have a true value of the real estate there,” said Jones, whose term ended this month as president of the Dearborn Realist Board, the local chapter of the National Association of Real Estate Brokers.
“Access to reasonable capital for Black borrowers is also needed because Blacks are often charged higher interest rates when it comes to buying a home,” Jones said.
Rodney Schley, president of the Chicago-based Appraisal Institute, said the appraisal industry does not consider a homeowner’s race when valuing homes.
“Appraisers take a lot of pride in being an objective source of real estate value information and 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,” he said. “Whether or not we agree with someone’s research methodology, we want to better understand what we might learn or glean from other people’s work.”
The Appraisal Institute has a project team that plans to review research and reports about diversity, equity and inclusion in appraisal, he said.