The home appraisal industry is among the nation’s least diverse industries, and its racial and ethnic homogeneity has been linked to reports of undervaluation and appraisal bias in Black and Hispanic neighborhoods. Remedying this bias is critical, as the racial and ethnic homeownership rate gaps remain wide and are expected to persist without policy intervention.

Although the field has taken steps toward increasing the racial and ethnic diversity of its workforce, these changes are long term and require structural changes to the certification process. In the short term, the real estate sector should include other tools, such as expanding and enhancing automated valuation models (AVMs) or eliminating the reliance on a neighborhood’s racial and ethnic makeup to identify comparable homes, that could have a more immediate impact.

The need for change is critical. In addition to the homeownership gap, disparities in home values mean that Black and Hispanic homeowners accumulate less housing wealth than white homeowners, reducing what can be passed down to future generations. A comprehensive toolkit that incorporates immediate and long-term solutions is necessary to address valuation bias, support homeownership, and ensure the sustainable accumulation and transfer of wealth for all households.

Today, fewer than half of Black and Hispanic households are homeowners. At the same time, homeowners of color typically accumulate less housing wealth relative to their white counterparts, directly contributing to the broader racial and ethnic wealth gap. Appraiser bias has likely played a role in these homeownership and housing wealth outcomes, and increasing diversity in the field can diminish this bias in the long term. Policymakers and lenders can also address undervaluation in the short term and eliminate a barrier to housing wealth and support more equitable homeownership outcomes.

Read the full article about deconstructing America's home appraisal industry by Michael Neal and Peter J. Mattingly at Urban Institute.