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Are Appraisals and Assessments Biased?
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Racial bias in home appraisals and assessments is not just an anecdote. Norm Miller (Hahn Chair & Professor of Real Estate Finance, University of San Diego and Vice President, Homer Hoyt Institute), Ruchi Singh (Assistant Professor, University of Georgia), and Richard K. Green (Director, USC Lusk Center for Real Estate) discuss the statistically significant racial and ethnic biases in appraisals and tax assessments.
Miller details the benefits of automated valuation models, but he also cautions that using machine learning without human oversight of variables can result in a different set of biases.
Singh shows how assessments are regressive, often resulting in a mismatch of a lower property value with higher property taxes. She also points out contributing factors, including why excluding information like nearby schools or the condition of the home can set the assessments in opposition to appraisals.
More from the discussion:
How to make the assessment process fairer
The importance of loan-to-value ratios in underwriting
Pressure appraisers face in avoiding errors
Why short-term and long-term appraisal models will be required to avoid bias
Relevant links:
New York Times Story: Home Appraised With a Black Owner: $472,000. With a White Owner: $750,000.
https://www.nytimes.com/2022/08/18/realestate/housing-discrimination-maryland.html
Freddie Mac: Racial and Ethnic Valuation Gaps In Home Purchase Appraisals
https://www.freddiemac.com/research/insight/20210920-home-appraisals
William Sprigg’s Perspective:
https://lusk.usc.edu/events/racial-justice-and-economics-crucial-pairing
Freddie Mac’s Appraisal Institute Diversity Initiative:
https://www.appraisalinstitute.org/the-appraisal-profession/appraiser-diversity-initiative/
More:
https://lusk.usc.edu/perspectives
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