How to Make the Housing Market More Equitable
Please consider How to Make the Housing Market More Equitable by Andre M. Perry.
Mr. Perry’s research with colleagues has shown that houses are underpriced in majority-Black neighborhoods, a process he calls “devaluation.” That can lead to lower property-tax revenue to fund local schools and infrastructure in those neighborhoods and reduced wealth and discretionary income for Black families.
"We really wanted to see the impact of race on home price. And we controlled for education, crime, walkability, all those fancy Zillow metrics. And what we found is homes in Black neighborhoods are underpriced by 23%, about $48,000 per home," says Perry.
Perry's Cure: More Black Appraisers
"The way you get past what really amounts to a distrust of Black people is to invest in Black people. On the appraisal side, [that means] investing in the training of and development of Black appraisers."
Appraisers Don't Set Prices
Perry's article is preposterous on many front but let's start with a question regarding his alleged cure.
There are bidding wars in some places and no buyers in others. Why is that?
The obvious answer is buyers are willing to pay more than the asking price in some areas because they see value. They will not pay the alleged appraised valuation in other areas because they don't.
Buyers, not appraises set prices.
I took a dive into Perry's flawed study. Some of what he says is accurate but his conclusions why are totally wrong. For example:
According to our analysis, differences in home and neighborhood quality do not fully explain the devaluation of homes in black neighborhoods. Homes of similar quality in neighborhoods with similar amenities are worth 23 percent less ($48,000 per home on average, amounting to $156 billion in cumulative losses) in majority black neighborhoods, compared to those with very few or no black residents.
Perry is No Judge of Quality
Perry is undoubtedly correct that homes of a similar size are priced lower in Black neighborhoods. He used Zillow data to conclude that. As bad as Zillow is about some things, square footages are likely to be accurate.
But who is Perry to assess quality of construction, interior design, neighborhood quality, and most importantly the price people are willing to pay for less crime and better schools?
Perry claims to adjust for crime and still comes up with an alleged 23% "devaluation".
Yeah right. If the market disagrees, so do I.
Curiously, if city appraisers did what Perry wants (appraised homes higher for no reason) property taxes would rise and the prices that people would be willing to pay would drop.
Perry Wants a Bubble
Add it all up and Perry is complaining that Black neighborhoods are not in the same housing bubble as white neighborhoods.
But if investors actually believed housing in a neighborhood was underpriced, they would swoop in, buy houses, fix them up and resell them for a profit or rent them out.
News for Perry
If homes are not selling it is because they are overpriced, not underpriced.
Alleged appraised value and black appraisers cannot change that simple fact.