- President-elect Joe Biden's policy proposals aim to stamp out racism and discrimination, two issues that plague the housing industry.
- He's pledged to address biased appraisals and exclusionary zoning, as well as bring back fair housing legislation and take other measures to address real estate's widening racial wealth gap.
- One of Biden's campaign promises is to allow the Office of Fair Lending and Equal Opportunity to enforce settlements against lenders who have discriminated against borrowers.
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When President-elect Joe Biden takes office in January, he will inherit a divided country with wildly mixed views on a wide range of subjects including systemic racism and discrimination — two issues that plague the housing industry.
Biden has said that tackling the discrimination based on race that is prevalent in the current housing market is a priority, and he has a several plans to combat the ever-widening racial wealth gap in real estate.
Here are the central actions he's promised to take.
READ MORE: The winners and losers of Biden's real-estate policies
Fix biased home-appraisal practices
When it comes to determining a home's worth, Biden plans on implementing a national standard for appraisals. This would help prevent homes in communities of color from being undervalued.
A 2018 case study by the Brookings Institution found that when compared to neighborhoods with very few or no Black residents, similar quality homes in majority Black neighborhoods with similar amenities were valued 23% less.
"The undervaluation of housing in black neighborhoods has important social implications," the report reads. "Black homeowners realize lower wealth accumulation, which makes it more difficult to start and invest in businesses and afford college tuition."
Some appraisal industry professionals have objected Biden's idea, using the argument that a national standard for appraisals already exists.
"The assertion that appraisers would systematically undervalue or overvalue real estate due to these factors is absurd and shows a profound misunderstanding of the real-estate valuation profession. Appraisers have nothing to gain by such behavior, and in doing so we would lose the hard-fought public trust we have achieved over many, many years," the president of the Appraisal Institute, Jefferson L. Sherman, wrote in a letter to Biden back in March. "Since national appraisal standards and ethics requirements already are in place, and since those requirements are enforced as law, there is no need for additional standards."
But a September study in the journal Social Problems found that the widening gap between Black home appraisals and white home appraisals could be attributed to appraisers using the "sales comparison approach" to valuing homes. This strategy, based off previously sold properties nearby, can result in unaware appraisers valuing homes based on pricing that was determined prior to the implementation and enforcement of fair housing laws in the 1960s and 1970s.
By using neighboring properties — whose prices may have been depressed for decades — as benchmarks, appraisers today "literally baked into the system the racialized element and continued it," said Junia Howell, one of the authors of the study.
In addition to appraisals, Biden plans to allow the Office of Fair Lending and Equal Opportunity to enforce settlements against lenders who have discriminated against borrowers.
In 2018, under Trump, Acting Consumer Financial Protection Bureau Director Mick Mulvaney stripped the agency's fair-lending office of enforcement powers, American Banker reported.
Bring back the Fair Housing Act
He would also re-implement the Affirmatively Furthering Fair Housing (AFFH) provision of the Fair Housing Act, which was introduced by the Obama administration but then suspended by the Trump Administration in July 2020.
This provision, Biden's website states, "requires communities receiving certain federal funding to proactively examine housing patterns and identify and address policies that have a discriminatory effect." The Fair Housing Act, according to the United States Department of Justice, protects people from being denied housing based on race or color, religion, sex, national origin, familial status, or disability.
A recent Forbes article said that the dismantling of the Affirmatively Furthering Fair Housing (AFFH) provision followed criticism that there were "too many hoops to jump through in order to get funding."
But the Biden initiative doesn't see it that way.
"The 2015 AFFH rule offers guidance, not a particular solution," Solomon Greene, who helped write the provision five years ago, told Forbes. "Every plan I've reviewed has been incredibly diverse; there was a huge range of strategies depending on the area. This is very far from Trump's assertion that the AFFH rule was requiring rezoning of suburbs or even to build affordable housing."
Expand Section 8 and reform "exclusionary" zoning policies
Miriam Axel-Lute, the editor of Shelterforce, a nonprofit publication from the National Housing Institute, talked to Forbes' Natalie Campisi about Biden's proposals to expand Section 8, the country's largest program to assist low-income renters. Currently 2 million people receive Section 8 vouchers, but that amounts to only 1 in 5 eligible households. Biden has vowed to make sure all eligible people can get vouchers.
"Expanding vouchers to all those eligible will need to be matched with a strong, national measure to include 'source of income' as a protected class under fair housing law," Axel-Lute told Forbes.
Across all of the public housing in the US, about 45% of residents are black, 32% are white and approximately 20% are Hispanic, according to the National Low Income Housing Coalition.
Section 8 tenants are sometimes discriminated against, but Biden has said he will advocate for legislation banning that kind of treatment.
Axel-Lute also said in the Forbes interview that targeting and changing exclusionary zoning policies will also help. Some local zoning laws don't support the construction of multi-family homes, she explained, which tend to have more affordable units — ones more likely to be eligible for Section 8 vouches — than single-family homes.
Biden has also pledged to put $300 million toward Local Housing Policy Grants, a program designed to help states and localities "eliminate exclusionary zoning policies and other local regulations that contribute to sprawl."
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