Restorative Appraisals for Equitable Community Development

Summary

WITH ACTION’s “restorative appraisals” reforms policy to require appraisers to use comparable sales from healthy white neighborhoods when appraising homes of like type in Black neighborhoods.

Description

Fannie Mae guidelines place Black communities at a disadvantage in the appraisal process due to historic and intentional denial of resources in these neighborhoods. The “restorative appraisal” would compare housing stock rather than neighborhoods. Current appraisal guidelines reinforce low values in already declining neighborhoods by restricting comps to the same or other Black neighborhoods, rather than similar houses in comparable white neighborhoods. Continuing to use the comparable sales in a declining neighborhood only perpetuates low values.

The Restorative Competitive Value (RCV) technique would compare housing stock, rather than neighborhoods. It would allow appraisers to expand their consideration of sales beyond traditional marketplace/district/neighborhood boundaries and consider nearby sales that transpired in the past but exceed common guidelines favoring only recent sales. In St. Louis, communities north of the Delmar/Olive Divide are historically undervalued due to racial discrimination. By considering transactions from alternative (white) communities that feature similar housing stock, the geographic pricing gaps would reveal a potential “restorative” gain in value for disadvantaged communities.