Vice President Kamala Harris announces the release of a plan during a White House event with Secretary Marcia L. Fudge, White House Domestic Policy Advisor Susan Rice and Americans affected by bias in the evaluation process
On June 1, 2021, the centennial of the Tulsa Race Massacre, President Biden announced the creation of the Interagency Property Assessment and Equity Task Force (PAVE) to develop a set of transformative actions to eradicate bias. racial and ethnic factors in house valuations. . Today, the task force publishes the PAVE Action Plan which, when enacted, represents the most comprehensive set of reforms ever proposed to advance equity in the housing assessment process. The task force is co-chaired by Marcia L. Fudge, Secretary of the US Department of Housing and Urban Development, and Susan Rice, Domestic Policy Advisor.
A property appraisal is an essential part of the home buying and lending process, intended to provide an independent, fair and objective estimate of a property’s market value so lenders can accurately assess risk. . Home ownership is the single largest contributor to wealth creation for Black and Brown households and continues to hold promise for multigenerational wealth creation and housing stability for households of color. But, the bias in home valuations limits the ability of black and brown families to enjoy the financial returns associated with homeownership, contributing to the already sprawling racial wealth gap. Today, the median white family holds eight times the wealth of the typical black family and five times the wealth of the typical Latino family. According to a recent studyeliminating racial disparities in the amount of wealth families derive from owning a home would reduce the wealth gap by an additional 16% between black and white households and an additional 41% between Latino and white households.
Since the launch of the task force, there have been numerous reports of black homeowners receiving higher ratings only after taking family photos and being represented by white families on their behalf. New research shows that misvaluation in communities of color can be widespread. A recent report from Freddie Mac found that appraisals for home purchases in majority black and majority Latino neighborhoods were about twice as likely to result in a value below the actual contract price (the amount a buyer is willing to pay for the property), compared to assessments in predominantly white neighborhoods. neighborhoods. Likewise, a recent study by Fannie Mae examination of refinance transactions found that white-owned homes are significantly more likely than black-owned homes to be valued at values that exceed algorithmic predictions.
PAVE Action Plan
The action plan details a set of commitments and actions, most of which can be taken using existing federal authorities, that will help every American have a shot at building generational wealth through homeownership. . You can read the full action plan at PAVE.HUD.gov.
Member agencies will take the following actions:
- Make the evaluation industry more accountable. The action plan sets out steps to improve oversight and accountability of the evaluation industry, which has long operated in a relatively closed and self-regulating framework and has not been effective in addressing deep-rooted inequalities. Specifically, it commits federal agencies to create a legislative proposal to modernize the governance structure of the appraisal industry and improves coordination and collaboration among federal law enforcement agencies to better identify and correct discrimination in assessments.
- Provide consumers with information and assistance. The action plan includes concrete efforts to hold homeowners and homebuyers accountable for effective action they can take when they receive a lower-than-expectation rating. For example, federal agencies commit to issuing guidelines and implementing new policies to improve the process by which an assessment can be reconsidered.
- Prevent Algorithmic Bias in Home Valuation. Federal agencies that regulate mortgage finance commit to include non-discrimination quality control standard as part of upcoming rule proposal establishing quality control standards on Automated Valuation Models (AVMs) . This will ensure that AVMs do not rely on biased data that could replicate past discrimination.
- Cultivate a well-educated appraisal profession that reflects the communities it serves. According to the Department of Labor’s Bureau of Labor Statistics, the appraiser/appraiser profession is approximately 97% white, making it one of the least diverse professions in the nation. The action plan sets out a series of actions to eliminate unnecessary education and experience requirements that make it difficult for underrepresented groups to enter the profession and to strengthen anti-bias training, fair housing and fair lending from existing appraisers.
- Leverage federal data and expertise to inform policy, practice and research on evaluation bias. The action plan proposes the development of an aggregated database of federal valuation data to better study, understand and address valuation bias, complemented by a working group of agency subject matter experts stakeholders to develop a research agenda on evaluation bias.
The PAVE Task Force has already made significant progress and its commitment continues. The task force has identified several additional policy initiatives that could have the potential to make a significant difference in ensuring fair and accurate home assessments for all communities. These policy ideas require thorough assessment and research, greater stakeholder input, and deeper exploration. The Task Force is committed to doing this work. As the task force moves into the next phase of its work to advance fairness in home appraisals, it will continue to seek opportunities to collaborate with lending institutions, philanthropy groups, universities, groups civil rights groups, advocates and industry associations to create a coordinated approach in tackling this problem.
To read the full report and stay up to date on the task force’s work, you can visit PAVE.hud.gov.