Appraisals and ValuationsRegulatory

Race-based appraisal gaps have narrowed in recent years: FHFA

The PAVE appraisal action plan may have had an impact on gaps between white and minority households, but the data does not necessarily prove a causal relationship

The Federal Housing Finance Agency (FHFA) this week published a blog illustrating that appraisal gaps between white, Hispanic/Latino and Black households have diminished since the 2022 announcement of the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) action plan, which the White House claims to be “empowering consumers with new tools and greater awareness of appraisal bias.”

“​Since the release of the PAVE Action Plan, many stakeholder actions at the federal, state, and local levels have increased awareness of racial bias in home valuations, and there has been increased regulatory and supervisory focus on discriminatory appraisals,” the FHFA blog post explained. “The PAVE Action Plan also included strategies and recommendations to improve the data available to study and monitor valuation bias.”

After the launch of the action plan, the FHFA published a separate blog post in August 2023 that found “the appraisal valuation gap continues to exist between white and minority population tracts.” But the data also suggested that a reduction in the appraisal gap had taken place “following the release of the PAVE Action Plan as compared to the time period before the initiation of the PAVE Task Force.”

In the new blog post, the FHFA cites data from the Uniform Appraisal Dataset to examine two distinct time periods: one for appraisals conducted from first-quarter 2013 through second-quarter 2021 (prior to the formation of the task force), and one for those conducted between Q2 2022 and Q4 2023, representing all available data after the announcement of the action plan.

Based on this data, the appraisal gap for consumers in census tracts with majority Black and Hispanic/Latino populations compared to the gap in white-majority tracts before the PAVE action plan (phase one) and after its release (phase two) show a notable difference.

In phase one, Black-majority tracts saw a 6% gap in appraisals, while Hispanic/Latino-majority tracts saw an 8.3% gap. In phase two, the Black-majority gap shrank to 3.8%, while the Hispanic/Latino majority tract fell to 5.1%. The reduced gap “declined in nearly all states with data available in phase two as compared to phase one.”

FHFA, however, is also careful to say that this does not necessarily represent causation from the PAVE action plan.

“Further analysis is needed to determine whether this is a causal relationship,” FHFA stated. “The findings in this blog are a promising trend as public and private stakeholders continue their efforts to eliminate home valuation inequities.”

There were also a handful of states where appraisal gaps widened between the phases. In Mississippi, there was an increase in the gap for Black-majority tracts between phases, while Hispanic/Latino-majority tracts also saw the gap grow between phases in Florida, New Mexico and Texas.

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