'Lowballed' documentary features racial inequities in Harris Co. home appraisals

HOUSTON, Texas (KTRK) -- New analysis by ABC Owned Television Stations' (OTV) data team determined that Black and Hispanic homeowners in Harris County are about twice as likely to be lowballed in their appraisals as their white neighbors. This is part of a growing nationwide issue and the center of "Our America: Lowballed," a new documentary premiering Friday.

Over the last 18 months in San Francisco, KGO's race and culture journalist, Julian Glover, has been investigating racial inequities in the home appraisal process. The Biden administration created a task force in March in an attempt to address the issue.

Watch "Our America: Lowballed" beginning Dec. 2 wherever you stream: Fire TV, Android TV, Apple TV and Roku.

Paul and Tenisha Austin became suspicious when their first home appraisal came back surprisingly low in February 2021, prompting them to appeal for a second one. This time, they removed everything in their California home that would've indicated they were Black and even asked a white friend to stand in for them.

The second appraisal came back for $1.482 million, almost $500,000 more than the first. The issue impacts neighborhoods all over the country, including right here in Houston.

The issue of racial inequities in home appraisals is something Dr. Junia Howell and her colleague, Dr. Elizabeth Korver-Glenn both started looking into nearly 10 years ago. They met while attending graduate school at Rice University, as scholars for the Kinder Institute for Urban Research.

Howell now teaches sociology at the University of Illinois Chicago and Korver-Glenn at Washington University in St. Louis. Both recently published a report in October called, "Appraised: The Persistent Evaluation of White Neighborhoods as More Valuable than Communities of Color."

"We began getting interested in this topic when we were living in Houston. This was around 2012 to 2013. We had seen multiple deals where communities of color had interest in their housing. There were these kind of hot market elements going on. Then an appraiser would come in and the appraisal would be lower than the offer, creating a short sale or having to renegotiate. We were wondering what was going on here," said Dr. Howell.

Data on racial inequities in home appraisals

ABC OTV's data team examined millions of federal mortgage loan records to identify those where the appraised value of a home was lower than the asking price in a sale for that home or the stated market value in a home loan refinance.

Nationally, they found homes sold in mostly Black neighborhoods are 2.5 times more likely to be under-appraised by at least 2% than those in mostly white neighborhoods. In Harris County, they concluded that 112 out of every 1,000 homes sold in mostly Black neighborhoods were lowballed, compared to 59 out of every 1,000 sales being under-appraised in mostly white neighborhoods.

Dr. Howell found similar trends based on a different data set from the Uniform Appraisal Dataset (UAD) Aggregate Statistics released by the Federal Housing Finance Agency (FHFA) in October, information that they've been waiting on since the beginning of their research nearly 10 years ago.

She believes this issue is partly impacted by the concept of the "ideal buyer."

"That's because of the appraising process itself, that asked appraisers to think about where else they might see a person buying this home or refinance this home, where else they might think they might live or be. It's the idea that these people belong in these areas that perpetuates these racial inequalities that we see that go above and beyond other socio-economic factors," said Dr. Howell.

Lack of diversity in appraisal industry

Both ABC OTV's Data Team and Dr. Howell's research found that people working in the appraisal industry are also overwhelmingly white. Our data shows that in Houston, 74% of appraisers are white, 14% are Hispanic/Latino, 7% are Black, and 2% are Asian.

On Thursday, the National Urban League Partnership and Wells Fargo announced a $5 million grant to create the Diverse Appraiser Initiative, a new program that aims to increase diversity and reduce barriers to entry in the home appraisal industry.

However, Dr. Howell said diversifying the appraisal industry won't necessarily solve the issue.

"If you just change the face of who's doing the appraisal, but ask them to use the same method, we're going to end up with the same result. We've interviewed and observed appraisers of color, too. Although some of them have really innovative ways to get around some of these same biases when they walk into a house, many of them also are still pulling on these deep, historical racist patterns. We need to also uproot those in order for us to have a diverse workforce that can actually create some equity in our home appraisals," she said.

Possible solutions

So how can we even begin to start addressing this issue? Dr. Howell recommends two approaches, and one requires the appraisal industry to use a new process that no longer relies on past sales.

"In the sales comparison approach, the only way that numbers get pulled into the equation is to start with previous sales. So an appraiser would find a comparable home, look at the sale price for that home and use that as their base for how much they think a house they're looking at should be appraised for," she said.

Instead, Dr. Howell suggests evaluations should be made based on the "property's cost" and "societal contribution."

She defines property cost as "the amount of natural materials (e.g. lumber, glass, fuel), human labor, and infrastructure resources (e.g. sewage, electricity, roads) required to build and maintain the physical dwelling and surrounding land as well as any negative effects the construction or rehabilitation of the property has on the environment."

Societal contribution is defined as "the benefit of particular dwelling types for community cohesion (e.g. enabling multigenerational families and long-term residents) and environment cost (e.g. dense developments with smaller footprints and renovating old buildings rather than demotions)."

RELATED: Our America: Lowballed

The second approach Dr. Howell mentioned is making reparations through targeted tax credits or stimulus programs for specific neighborhoods that have been affected. She said doing so can redirect wealth from communities that have experienced excessive appreciation to those that have suffered from persistent racism. Without adjudicating for past injustices, she believes inequities will likely persist and grow.

"We need to address the inequality that has been created and redistribute resources to ensure those that not only have been disadvantaged for decades, but have been disadvantaged in the last nine years. We have names. We have addresses. We have dates. We have receipts. So this is not the same kind of problem that we have with some other systemic inequalities that trace back so many decades where we don't know who is affected," Dr. Howell said.

What can you do?

There is so much more to this subject that we could explore, but after speaking to people from multiple housing advocacy organizations, we found that the Greater Houston area is only beginning to think about this issue.

Advocates believe people have not come forward because they aren't even aware that they may have been shorted in the appraisal process or where they can turn to for some help if they suspect they have.

If you think you may have been impacted, reach out to us at ABC13. You can find local fair housing agencies by visiting the National Fair Housing Alliance's website. You can also find more information at the official website for Our America: Lowballed.

If you would like to file a complaint, you can submit a federal report at the U.S. Department of Housing and Urban Development (HUD)'s website or a state report at the Texas Workforce Commission's website. As a disclaimer, you typically have about one year from the last date of known discrimination to file an administrative complaint.

"Home appraisals are a key piece of generational wealth, because how much your home is appreciating over time means you have more or less resources to refinance and use that capital to either help keep your house in good standing for your family or use it for educational resources or medical bills. So it becomes the cornerstone because of how we created our system in the U.S. of most people's wealth," said Dr. Howell.

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