JPMorgan Is Calling for Appraisal Industry Reforms to End Racial Bias in Housing - by Richard Oyamo
Wednesday, 16 June 2021 -
America’s biggest bank, JPMorgan, is championing efforts to stop racial bias in home appraisals in the country - Richard Oyamo reports.
Calling for the much-needed diversity in the appraisal sector, the bank has thrown its weight into new commitments to fight America’s housing inequality, with the focus on promoting equitable home valuations. And for the first time, the bank has today outlined its strategic backing plans for specific legislations aimed at fighting appraisal bias.
Beyond Property Appraisals
The bank has promised to eliminate the barriers that make it harder for Latinx and Black households to:
Access affordable housing facilities.
Buy homes in America.
Heather Higginbottom, who is JPMorgan’s Chase Policy Centre as well the chairperson of global philanthropy, attributed the racial appraisal bias to the systemic barriers in housing that have existed for as long as we can remember.
JPMorgan’s $30 Billion Pledge to Ease Racial Inequality in Housing
This year, the bank has promised a $400 million philanthropic commitment that would go towards low-interest loans, affordable housing organizations, as well as equity and grants to non-profit organizations. This commitment is part of the bank’s $30 billion support (announced October 2020) to ease racial inequalities.
But that is just the gist of it. According to recent innovation studies conducted to minimize the racial wealth gap, discrimination, especially in the housing industry is the chief contributor to America's enormous wealth gap. The study highlighted that owning a home needs the buyer to save for a down payment, and having one is the easiest way to build wealth.
In what the Brookings Institution report refers to as a “$156 billion problem,” houses in Latinx and majority-Black suburbs are, on average, valued at $48,000 less. This valuation discrepancy represents 23% less than homes in neighbourhoods with few or no black residents.
This sentiment is also echoed by Michael Hsu, Comptroller of the Currency, appraisal bias and discrimination are the biggest contributors to housing valuation inequality, which adversely affects the basic foundation of building wealth for minority households. He reiterates that the impact has been amplified enough and can’t be ignored anymore.
Homeownership in America
According to the latest Urban Institute analysis, homeownership for White Americans today is at 72%, compared to 42% for Black Americans. Incredibly, the 30% gap is getting worse as it eclipses the figures for 1968, a time when discrimination in housing was legal.
JPMorgan has called an end to today's worsening home market conditions, citing the rising prices, house shortages, and the existing barriers to down payment access: issues that keep homeownership out of reach for Latinx and Black Americans, as well low-income families.
Is Revamping the Appraisal Industry the Way Out?
JPMorgan has called for reforms in the appraisal sector to stop the racial bias in home and property valuations. To highlight the problem, only 2% of appraisers in the country are Black, and some minority groups conceal their identity to have their homes valued favourably. Some of the reforms JPMorgan is calling for include:
Creation of an anti-bias training requirement for all appraisers.
Establishment of a new national home valuation standard and a platform for equal access to valuation data.
Rulebook reform to ensure appraisers utilize more data and less judgment.
In championing such efforts, JPMorgan has invested $1 million in the Brookings Institution and Ashoka to fund innovative studies as to how the appraisal gap can be narrowed down. The bank is also offering $50,000 to Black and minority women who feel their homes were undervalued.
(Written and edited by: Richard Oyamo for The Decision Maker)