United States
September 2022
US Market Report

Could PropTech save real estate from an unequal past?

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A recent lawsuit has touched off conversation about the history of discrimination in the US housing industry, and what can be done to reform it.

In a complaint filed in Maryland District Court in mid-August, a Black couple claims that their home was undervalued by more than a quarter of a million dollars because of their race. The couple say they became suspicious when their home was valued at just $472,000 after they’d spent more than $40,000 in renovations. Once they removed family photos and had a white colleague stand in for them during the appraisal, their home was valued at $750,000.

Appraisal bias, redlining, harassment, and other discriminatory practices are illegal under The Fair Housing Act of 1968. Nonetheless, The National Fair Housing Alliance (NFHA) reported there were still 28,712 official complaints of housing discrimination in the US in 2020, 73% of which were rental-related. These statistics are on trend with the NFHA’s 2019 data.

More than 16% of all complaints were based on race, which was the second most reported type of discrimination, according to the NFHA. A report from Zillow found that renters of color often pay higher security deposits and application fees than white renters. And while rising mortgage rates over the last year contributed to making homeownership unattainable for more than half of Black renters, research analysts believe endemic racism is partially to blame. 

“The effect of generations of racist housing policies [kept] Black families from being able to afford a home,” says Raheem Hanifa, writer of a recent housing report from Harvard University.

Jim Crow laws used to permit the blatant segregation of white and Black neighborhoods, as well as the continued relegation of people of color to second class status. As a result of living in poorer areas with unequal opportunity, many modern Black Americans have unfairly inherited their ancestors’ poverty, further entrenched through unequal access to education, finance, etc.

Today, brokers and/or owners won’t think of outright refusing to rent or sell to tenants purely because of skin color. But a degree of racism persists in the form of underappraisals of Black-owned homes, higher mortgage denial rates, exclusionary advertising, and more.

For Black women specifically, securing affordable housing is harder still. One analysis from the Gender Equity Policy Institute (GEPI) – a think tank dedicated to advancing opportunity for marginalized groups – states that women in California overall are more likely than men to struggle to pay for housing, and 59% of Black women are rent burdened. Again, GEPI claims this is due to systemic (gender and racial) inequality.

Bigotry is roundly condemned today, but property managers and landlords may still need to be sensitized to what they say to and around tenants, as unintentional discrimination could rack up thousands in litigation costs. 

That being said, property managers are within their rights to select the best possible tenants to occupy their properties. 

Adopting neutral (i.e., color-blind) financial and process controls with PropTech is one way to protect your business against false accusations. With property management software, payment reminders aren’t sent out based on anything but objective violation of pre-established payment rules – no human error or bias.

More housing discrimination headlines

Do women have to work harder for a home? – ConsumerAffairs

Bank of America tests no-down-payment mortgages in Black and Hispanic neighborhoods – The New York Times

President Biden takes aim at racist home appraisals that hurt communities of color – Realtor.com

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