Milwaukee Appraiser Diversity Initiative

Starting Date: 2020-01-01

Lack of representation and lack of understanding of local context, as well as bias, contribute to inequitable devaluation of real estate assets within Milwaukee’s communities of color, and therefore inhibit wealth creation in Black communities. Yet, these same communities have talented people who, once trained, can act as bias disruptors for the industry by bringing their unique understanding of their neighborhoods and community assets. The core model of this innovation addresses the value of homes in communities of color by increasing representation of Black, Latino/Latina, and Asian individuals within the appraisal industry, while simultaneously increasing the understanding of bias and devaluation within local institutions. Greater Milwaukee Committee is scaffolding programmatic intervention with advocacy for systems change, and away from bias artificially devaluing communities of color. In this way, the model will be market sustaining once a tipping point of support is reached from mortgage lenders locally, recognizing both the community benefit, as well as the business bottom line. The concept is similar to the ACRE Program led by our partner LISC Milwaukee. The ACRE program has seen tremendous success over the last fifteen years, developing a diverse community of commercial real estate experts locally (Associates in Commercial Real Estate), and creating new capital structures for Black and brown developers.

Related Documents

What is the geographic reach of your work to date?

Local

Which metropolitan areas (if any) does your work focus on?

Milwaukee County, Wisconsin

What is the core idea of your innovation? How does it increase the value of homes in Black communities?

Lack of representation and lack of understanding of local context, as well as bias, contribute to inequitable devaluation of real estate assets within Milwaukee’s communities of color, and therefore inhibit wealth creation in Black communities. Yet, these same communities have talented people who, once trained, can act as bias disruptors for the industry by bringing their unique understanding of their neighborhoods and community assets.

Our core model innovation addresses the value of homes in communities of color by increasing representation of Black, Latino/Latina, and Asian individuals within the appraisal industry. This can have an immediate structural impact on the composition of the industry locally, dismantling gatekeeping within the industry. We also acknowledge that representation alone, while being more equitable, may not lead to different outcomes. Due to this we are looking at ensuring that education around bias is a component of the training process as well as simultaneously convening local discussion around the understanding of bias and devaluation in partnership with financial institutions. We believe this can position our trainees as a real asset to these companies and help move their institutions towards systemic change. A number of the programmatic interventions we are being intentional about with our model are as follows:

a) Evaluate the partners through a Diversity, Equity, and Inclusion (DEI) lens to ensure they are committed to addressing bias and unfair practices in the appraisal system. We plan to consult with a DEI practitioner to advise.

b) Incorporate a comprehensive fair housing training into the curriculum with the support of experts at the Metropolitan Milwaukee Fair Housing Council, coupled with the standard USAP continuing education course for credentialed appraisers.

c) Utilize connections to local networks of diverse real estate brokers and developers in order to connect appraisers-in-training into the industry and provide insight into multiple points in the development continuum, enabling a wider lens and holistic view of real estate development and collective vision.

d) Commit to making the program as academically accessible as possible, regardless of applicant background and previous experience.

How is your idea new or different from current approaches?

a) Based on our research and feedback from other challenge participants, this model is distinct from the few national and local efforts to diversify the workforce in the appraisal industry. Other efforts we have researched are primarily based on marketing of appraisal career opportunities or small scholarships to support the upfront education. They fall short of offering direct, meaningful investments to support the time and financial costs for individuals from diverse backgrounds to enter the industry. They also are limited in addressing and acknowledging explicit or implicit bias in appraisals. Our model offers a distinct approach to the devaluation in the Milwaukee market, by creating a pipeline for underrepresented populations to enter appraisal careers and simultaneously addressing structural bias head-on.

b) While our pilot requires up front philanthropic investment, we have modeled a multi-year structure which becomes self-sustaining to address an aging workforce in our region, through longer term shared investment from appraisal companies and local financial institutions looking for growth opportunities. It would be mutually beneficial to them because we would funnel in our recently trained appraisers into their organizations to fill gaps, and in return receive a percentage contribution to the continuation of our program.

What are the primary circumstances that devalue homes in Black communities that you are addressing? What is the impact?

a) Primarily, we are addressing an extreme underrepresentation of our communities of color in the appraisal industry locally, as well as intentional and unintentional bias. Data from Emsi (Q3 2021) shows starker contrasts in Milwaukee when compared to national trends. In Milwaukee County, within the property appraisers and assessors job classification, 92% are white while only 64% of the population of the county is white. In tandem with representation, we will ensure that bias and devaluation are part of the educational component of pre- and post-licensure training and preparedness of new appraisers. We also will recruit program participants with an understanding of our communities of color and local assets. We will also use this initiative as a mechanism to elevate and address larger systems of devaluation in appraisal and financial industries.

b) The direct impact will be 30 new licensed appraisers, from underrepresented backgrounds, over the course of the first three years. We have built in a support structure to ensure connections to employment as well. The indirect impacts include elevating the conversation around appraisal bias locally, both publicly and with lending institutions, and reducing the overall devaluation within Black and brown neighborhoods in Milwaukee (Metro with 8th most devaluation of Black neighborhoods in the country, at 34%, according to Dr. Perry’s 2018 research).

What were your “aha” moments (the key insights) that led you to see how your innovation could work?

There were three core insights which our innovation was built on. First, we gained an understanding that entering appraisal careers is difficult for new entrants without a connection to an existing firm. Our understanding is that this is largely due to the post-licensure hours of experience requirement, as well as the trajectory and inertia of a homogenous workforce and industry locally. Our second insight was realizing this approach has never been tried. Through our research, we found no efforts pairing racial diversification in the appraisal industry with meaningful paid training, or otherwise adequate support. Locally, there has been success with a cohort training model to facilitate racial diversification in an adjacent industry (commercial real estate). Similar gains can be made in the appraisal industry with prioritization of resources and focus. The final key insight was hearing from engaged members of the lending community who expressed willingness from mortgage lenders to create internal changes related to reducing bias in appraisals, both as part of their community commitment, as well as the business that is left on the table when the bank passes on a loan, due to undervaluation.

How does your innovation create structural change? What will be different in 5-10 years if you are successful?

Our innovation can create structural change through:

a) Increasing racial representation within appraisal careers with professionals that have a shared and unique understanding of community assets in devalued neighborhoods;

b) Increasing understanding of how bias can devalue real estate, both within program participants and larger, institutional players;

c) Increasing lender and sector commitments to reduce and prevent bias; When successful in these areas, less real estate devaluation will occur in our communities of color locally.

We have considered the scalability of this model and the transferability to other markets. Locally, there are three steps to getting to a self-sustaining model, starting with philanthropic subsidy, transitioning to institutional support and commitment on behalf of lending institutions, and, ultimately, reinforcing an apprentice workforce model within the industry itself to create internal industry pathways which are market competitive. We anticipate by year three, and our third cohort, we can reduce the costs of administering the program by at least 25% and transfer at least 50% of expenses along to local appraisal companies and mortgage lenders who recognize and value the benefit of a diverse workforce.

What is your innovation’s path to (i.e. strategy for) success? What momentum or impact have you achieved thus far?

a) We have support from a broad set of stakeholders locally who have been engaged in developing this model over the past two years, spanning scale and industry. In addition, the national conversation around devaluation has picked up in the last six months and has helped reinforce our case locally, particularly with the degree of racial segregation that presently exists in our market.

b) We have submitted and received commitments from a number of philanthropic and state funding opportunities. We received a preliminary commitment from our local workforce board, Employ Milwaukee, to implement the recruitment and programming portions for a pilot cohort, as well as much of the paid training via ARPA allocations. This investment and vote of confidence is helping us leverage other partnerships.

c) Hosted roundtable discussions with educational partners who are seeking opportunities to collaborate on making the appraisal field an attractive, livable wage and in-demand job for our market.

What will take your innovation to the next level?

We have local partners lined up to implement this innovation and are currently securing the remaining funding. To take things to the next level, elevation and validity from Ashoka and Brooking’s national networks would help reinforce our conversations with the appraisal and financial industries, especially to the market presidents of the banks. As well, support navigating the push, beyond programmatic implementation, into institutional systems change will be critical. Also, we have been focused narrowly on conventional residential appraisals and getting further feedback as we are refining the model on how it could intersect with a full spectrum of appraisal products and special purpose credit programs could be very valuable.

How will you involve others to move your initiative forward?

a) In order for it to be the most impactful, we need it to be continually informed by those most impacted: both those with currently devalued homes and diverse, aspiring appraisers. We have had conversations with those who have felt their homes were unfairly appraised, with diverse appraisers existing in the market, with job seekers, and with a standing committee we convene of Community Leaders, composed of both resident leaders and community organizers. However, we will need to continually embed this practice into the ongoing development, especially as it is rapidly coming together. This also requires flexible resources.

b) As well, we need buy- in from lending institutions. This will be critical to making our innovation a success and through MKE United’s parent entity, the Greater Milwaukee Committee, we have many existing relationships. We have had one regional bank partner who has been deeply engaged in developing our pilot model through their community accountability team. As this pilot comes to fruition, we will need much deeper engagement with lenders to ensure long term success and structural change. We believe it can be a dual benefit to financial institutions. Not only could this represent a portion of their community commitment, but it is in their business interest to close home loans and refinances with accurate valuation. Devaluing properties leaves business on the table.

What is the current composition of your team (types of roles, qualifications, full-time vs. part-time, board members, etc.). How do you plan to evolve the team’s composition as the innovation grows?

MKE United currently has an initiative team of two full time staff members working on this pilot, as part of a larger portfolio of investment and systems change priorities. Our staff team brings experience in strategy development, consulting, human resources, DEI, marketing, communications, and national service. That said, we recognize we do not have the full expertise internally needed for implementation of an effort such as this, so we have been active and transparent in communication with local partners about our desire for collaboration and systems change. Beyond staff, we work in close partnership with many community organizations and the City of Milwaukee, as well as being directed by an Executive Committee which comprises both institutional and neighborhood leaders from across Milwaukee (https://www.mkeunited.com/project-team).

Within the model itself, we have a number of partnership roles for implementation. The Greater Milwaukee Urban League (whose CEO sits on MKE United’s Executive Committee), Employ Milwaukee (Milwaukee County’s Workforce Development Board), the Milwaukee Area Technical College, and the City of Milwaukee have all expressed interest in collaboration to make this a success locally. We also have vetted the model with the MKE United Community Leaders Committee, which is composed of residents and neighborhood organizers, and intend to continue doing so throughout implementation.

As the innovation grows, our intent is to share our learnings with other markets, given this model’s potential for replication. MKE United’s nesting within the Greater Milwaukee Committee, also positions us well to advance the system’s level conversations with private sector leadership for businesses which span the country.

How does your team reflect communities directly impacted by the topic you are addressing? Why are you, your team, or organization dedicated to the issue?

a) MKE United’s Executive Committee comprises institutional leaders across Milwaukee’s private, public, nonprofit, and grassroots communities across race and gender (https://www.mkeunited.com/project-team). Our leadership is committed to implementing an inclusive vision for Milwaukee’s Greater Downtown and ensuring equitable investment grows across our community. In addition, we have convened a wide array of collaborators for feedback on this concept. This includes banks, philanthropy, neighborhood associations, community residents, advocates, mortgage insurers, real estate developers, community development corporations, appraisers, home counseling agencies, as well as city and state agencies. We have led with transparency with our network around the development of this model in order to ensure the outcome meets the needs of our community. That said, this is ongoing work throughout continued planning and into implementation.

b) One of MKE United’s focus areas pertains to neighborhoods and housing (http://bit.ly/MKEUnited, p. 10). In order to see increased residential investment, as well as to more adequately recognize existing wealth, we are committed to working to reduce racial devaluation. We previously had been driving forward in multiple areas, including displacement prevention and Black and Latino/Latina homeownership. In early 2021, with other partners carrying that torch forward and with our support, launching this pilot became our primary, short-term housing priority. Our team is dedicated to structurally changing racial devaluation dynamics in our city.

c) My personal commitment is to continue finding new ways to be a part of the solution to address social equity issues for communities with people of color. I want to help change the negative narrative and perception of what it means to be a Black American. I’m committed to holding myself accountable in the areas of my work to progress towards a future of closing the gap of classism. I will be bold in challenging the status quo through my sphere of influence by articulating the needs of those living in those targeted populations, and suggesting new approaches to build trust and connectivity. It is my hope to see families of color in my hometown in Milwaukee truly thrive having their basic needs met with a fair advantage and equal accessibility to opportunities.

Is there anything else you think we should know about your innovation?

This pilot, as one identified path to address more equitable appraisals locally, was formally identified as a priority area for MKE United in January 2020. Since then our team has been collaborating with partners and preparing the groundwork for a programmatic launch. Pending financial and operational readiness, we intend to launch in 2022 with an inaugural training cohort starting in fall 2022.