Vice President Kamala Harris announced the release of the 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 assessment process
On June 1, 2021—the 100th anniversary of the Tulsa Race Massacre—President Biden announced the formation of the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) to develop a transformative package of measures to address racial and ethnic bias in valuation to eradicate from homes. Today, the Task Force releases the PAVE Action Plan, which, once enacted, represents the most comprehensive set of reforms ever proposed to promote equity in the property valuation process. The task force is 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 a critical element of the property buying and lending process and is intended to provide an independent, fair and objective estimate of a property’s market value to enable lenders to accurately assess risk. Homeownership is a primary contributor to wealth creation for black and brown households and continues to hold promise for multigenerational wealth building and housing stability for black households. But the bias in home valuations limits the ability of black and brown families to enjoy the financial rewards that come with home ownership, contributing to the already widespread racial wealth divide. Today, the middle white family owns eight times the wealth of the typical black family and five times the wealth of the typical Latino family. According to a recent study, eliminating racial disparities in the amount of wealth families earn from home ownership would reduce the wealth gap by an additional 16 percent between black and white households and by an additional 41 percent between Hispanic and white households.
Immediately since the task force’s inception, there have been numerous reports of black homeowners receiving higher ratings only after family photos were removed and white families represented them in their place. New research shows misperceptions can be rife in communities of color. A recent report by Freddie Mac found that appraisals for home purchases in Black majority and Hispanic majority 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 ratings in predominantly white neighborhoods. Similarly, a recent study by Fannie Mae examining refinancing transactions found that white-owned homes are much more likely than black-owned homes to be valued at values that exceed algorithmic predictions.
PAVE Action Plan
The Action Plan outlines a series of commitments and actions, most of which can be taken using existing federal agencies, that will help every American have the opportunity to build generational wealth through home ownership. You can read the full action plan at PAVE.HUD.gov.
Member agencies will take the following actions:
- Make the review industry more responsible. The action plan sets out steps to improve the oversight and accountability of the ratings industry, which has long operated within a relatively closed and self-regulated framework and has not been effective in tackling deep-rooted inequalities. Specifically, it requires federal agencies to create a legislative proposal to modernize the governance structure of the reviews industry, and improves coordination and collaboration among federal law enforcement agencies to better identify and eliminate discrimination in reviews.
- Empower consumers with information and support. The action plan includes concrete efforts to educate homeowners and homebuyers about effective steps they can take if they receive a lower-than-expected rating. For example, federal agencies commit to issuing guidelines and implementing new guidelines to improve the process by which an assessment can be reviewed.
- Prevent algorithmic bias in real estate valuation. Federal agencies that regulate mortgage financing are committing to include a nondiscrimination quality control standard as part of a forthcoming rule proposal that establishes quality control standards for AVMs (Automated Valuation Models). This ensures that AVMs do not rely on biased data that could replicate previous discrimination.
- Cultivate a surveyor profession that is well educated and like the communities it serves. According to the Department of Labor’s Bureau of Labor Statistics, the appraiser/appraiser occupation is about 97 percent white, making it one of the least diverse occupations in the country. The Action Plan proposes a number of measures to eliminate unnecessary education and experience requirements that make it difficult for under-represented groups to enter the profession and to strengthen non-bias, fair placement and fair lending training for existing appraisers.
- Use federal data and expertise to inform policy, practice, and research about valuation bias. The action plan proposes the development of an aggregate database of federal assessment data to better study, understand and address assessment bias, complemented by a working group composed of subject matter experts from advocacy organizations to develop a research agenda on assessment bias.
The PAVE Task Force has already made significant progress and remains committed to it. The task force identified several additional policy initiatives that could have the potential to make a significant difference in ensuring fair and accurate property valuations for all communities. These policy ideas require in-depth evaluation and research, greater input from stakeholders, and further investigation. The task force is committed to this task. As the task force moves to the next phase of its work to promote equity in home appraisals, it will continue to look for ways to work with lending institutions, philanthropy groups, colleges, civil rights groups, attorneys and industry associations to create a coordinated approach address this problem.
To read the full report and keep up to date with the work of the task force, you can visit PAVE.hud.gov.