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Notes from the Field

An Unfamiliar Champion in the Fight: Black Homeownership Has an Enduring Advocate

By raising awareness of issues that challenge black homeownership today, the Cleveland Realtist Association helps anyone—but black consumers in particular—buy property and sustain the benefits of homeownership in any community.

As a board member of the Cleveland Realtist Association (CRA), I am sometimes asked why the organization is necessary when there are laws, such as the Fair Housing Act of 1968, in place to combat housing discrimination.1 Such laws may exist, but past explicit discrimination, such as redlining, steering, and disinvestment, along with the foreclosure crisis, continues to challenge black homeownership today—according to 2018 Census estimates, the black homeownership rate is 41 percent, a 50-year low.2,3The CRA is a local chapter of the National Association of Real Estate Brokers (NAREB), which was formed in 1947 because black real estate agents and professionals were not allowed to join the National Association of Realtors. The CRA has been working in the Greater Cleveland community since 1948, and its mission of “Democracy in Housing” helps anyone—but black consumers in particular—buy property and sustain the benefits of homeownership in any community that they choose.

To uphold its mission, the organization advocates for policies at the federal, state, and local levels aimed at supporting black homeownership. An example of such policies is modernizing credit scoring to include rent and utility bill payments in addition to, or in place of, traditional credit considerations in the underwriting process. NAREB would also like to see passage of The American Dream Down Payment Act—legislation that would offer tax advantages for savings accounts used for the down payment of a home.

While advocating for policy changes is important, the CRA also continues to build partnerships with local financial institutions to provide homeownership education to consumers. Through its HUD-approved nonprofit, the National Investment Division-Housing Counseling Agency (NID-HCA), the organization leverages relationships with bankers around the country to prepare future homeowners and provide down-payment assistance. There are also continual efforts to raise awareness of black homeownership issues through the State of Black Housing in America (SHIBA) annual reports and community engagement during Realtist Week, which occurs each April during National Fair Housing Month. A key event during this week is advocacy day, during which local chapters meet with leaders about a pressing issue that is affecting homeownership in black and low- and moderate-income communities. This April, the focus for the CRA’s advocacy day is the appraisal gap in black neighborhoods.

The appraisal gap4 is preventing people from purchasing homes in several predominately black neighborhoods in the city of Cleveland, according to the experiences of real estate agents in the organization. Buyers and sellers are agreeing to transactions at a set price, but often an appraisal comes back with a value lower than the agreed price. This gap is partly attributed to lasting effects of the housing crisis, during which black neighborhoods were typically hit the hardest with foreclosures and vacancies, and the remaining homeowners lost value in their properties; those home values have not yet returned to pre-housing-crisis levels in many neighborhoods.5

The damage of devaluated properties is seen disproportionately in homes located in black neighborhoods. Researchers found that even after accounting for home and neighborhood quality, homes in predominately black neighborhoods are valued at 23 percent less than in neighborhoods without black residents.6

Another factor in the appraisal gap is the possible implicit bias of appraisers. Cleveland is not the only location with this problem. In a 2015 study, researchers found that in the Greater Houston area, the racial composition of a neighborhood can affect the property value during the appraisal process.7 In 2019, the CRA began working with city of Cleveland leaders to assess the extent of the appraisal gap in some east-side neighborhoods.

The appraisal gap is an added stress on the sustainability of black homeownership. NAREB and CRA continue to press for solutions, remaining committed to improving outcomes by advocating for housing policies and partnering with other leaders to improve black homeownership. The hope is that, working together, Cleveland realtors and leaders can recommend policy changes to address the issue because homeownership can impact wealth accumulation for generations to come.

The views expressed in this report are those of the author(s) and are not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System.

  1. The Fair Housing Act of 1968 prohibits the refusal to sell or rent a property to any person because of race, color, disability, religion, sex, familial status, or national origin. Return to 1
  2. Capps, Kristin and Kate Rabinowitz. 2018. How the Fair Housing Act Failed Black Homeowners. City Lab. April. Burd-Sharps, Sarah and Rebecca Rasch. 2015. Return to 2
  3. U.S. Census Bureau. 2018. ACS 1-year estimates. Return to 3
  4. The appraisal gap occurs when the appraised value of a home is lower than the agreed-upon price between buyer and seller in a purchase contract. Lenders will finance a home purchase only up to the appraised value of a home; when an appraisal gap exists, the buyer usually has to make up the difference in additional monies in order to move forward with the purchase. Return to 4
  5. Zonta, Michael. 2019. Racial Disparities in Home Appreciation. Center for American Progress. July. Return to 5
  6. Perry, Andre, Jonathan Rothwell and David Harshbarger. 2018. The Devaluation of Assets in Black Neighborhoods: The Case of Residential Property. Brookings. November. Return to 6
  7. Howell, Junia and Elizabeth Korver-Glenn. 2018. “Neighborhoods, Race, and the 21st Century Housing Appraisal Industry.” Sociology of Race and Ethnicity. Vol. 4(4) 473-490. American Sociological Association. February. Return to 7