For house hunters, there are many factors to consider when purchasing a new property. Natural light, open floor plans, and a big backyard may be on a potential buyer’s wish list. One thing that tends to top the list, however, is the quality of schools in the surrounding neighborhood. It’s commonly accepted by the real estate industry that higher quality schools translate to higher real estate values. The connection between school quality and property values is undeniable, with many studies confirming such a trend.

Fair housing advocates contend, however, that closely tying school rankings to property values has profound consequences. Many schools with lower rankings have a larger population of poor, minority students. Furthermore, the rise of online databases for house hunting, like Zillow, has allegedly increased illegal “steering” of people out of specific communities by prominently featuring school ratings online. Such advertisements and practices may be in violation of the Fair Housing Act.

Property Values and School Ratings

In a 2013 national study by realty brokerage company Redfin, people paid $50 more per square foot for homes in top-rated school districts. The study looked at 407,000 home sales and 11,000 elementary school districts in 57 metropolitan markets. Data was compiled from multiple listing services, as well as school characteristics and test scores from GreatSchools and Onboard Informatics.

“Markham suburbs aerial edit2” Courtesy of IDuke; License: (CC BY-SA 2.5)

Homes located near each other with the exact same square footage, number of bedrooms, and number of bathrooms can vary by tens of thousands to hundreds of thousands of dollars just because they are served by different schools. On the coast in California, for example, the price differential could be upwards of $300,000 to $500,000. Realtor.com recently completed a national study of homes within the boundaries of higher-rated public school districts versus homes in lower-ranked districts. The study uncovered that homes in the higher-ranked districts are 49 percent more expensive on average than the national median list price, and a whopping 77 percent more expensive than homes found within lower-ranked districts.

Real estate agents and industry advocates are quick to point out, however, that such research may not fully account for other factors that increase property values. Amenities such as a neighborhood swimming pool, “walkability,” and other physical improvements and facilities can drive home prices up, not just school ratings. It may be a critical consideration for families with children, but it is not the sole factor that increases property values.

“Steering” and Fair Housing Considerations

“Steering” is a process that influences a potential buyer’s choice of communities or neighborhoods on the basis of race, color, religion, gender, disability, familial status, or national origin. Not only is it unethical, but it limits the choices a potential buyer may have when purchasing a property. Steering was also made illegal under the Fair Housing Act.

The practice occurs when a real estate agent directs a prospective buyer interested in particular properties to equivalent homes in a specific neighborhood or community based on one of the protected characteristics. A real estate agent can “steer” clients by making positive or negative comments about a neighborhood, which can direct a buyer toward or away from a community. This can especially be an issue when it comes to prospective buyers’ questions about schools. Oftentimes characterizations such as “a school with low test scores” or “declining school district” may be used as coded language to talk about race. The advocacy group National Fair Housing Alliance found in a 2006 report that discussing school quality was becoming a proxy for discussing the racial or ethnic composition of a neighborhood.

The achievement gaps between white students and black and Hispanic students are massive and well-documented; the larger the socioeconomic disparity, the larger the achievement gap. Moreover, black and Hispanic students are far more likely to grow up in poorer households, but middle-class black and Hispanic students are more likely than poor white children to attend schools with a higher percentage of poor students. Less qualified teachers, large learning gaps, and lower standardized test scores all translate into one thing–a lower school rating.

The National Association of Realtors even notes that innocent conversations regarding school quality may create an FHA issue. Touting the accolades of a school in one district, while remaining silent on another school may be alluding to a racial distinction that steers prospective buyers out of one neighborhood and into a different one. Realtors must be extremely cautious in accommodating buyers’ preferences during the housing search without purposefully limiting their choices.

Rise of Online Databases and Redlining

In the past, fair housing laws covered statements and advertisements by real estate agencies and landlords. The rise and proliferation of the internet, however, has encouraged the growth of another form of house hunting: research in online databases. While there is a myriad of choices, some of the most popular ones are Zillow, Homes.com, and Redfin.

When a potential buyer is looking at a particular property on one of these sites, a link to a local school rating is prominently featured. With just a click of the mouse, the racial and ethnic composition of a school is unveiled, and the sites feature a color-coded system for the school rating: green, yellow, and red.

Such a system is reminiscent of “redlining,” a practice where maps showed communities with minorities in a red shade, denoting where financial investments were denied and systematically withheld from borrowers. After the Great Depression, the U.S. government wanted to evaluate the riskiness of mortgages with the help of local realtors and appraisers. Neighborhoods with minority residents were consistently marked red, considered high-risk for any mortgage lender. The practice was so extreme that a single black household in a middle-class neighborhood could make the entire area too risky for mortgage loans. Without access to better mortgages, black families looking to buy homes were forced to turn to predatory lenders. Redlining is now banned, but it has left behind racism and segregation that still shapes housing today in cities large and small. 

Most of the time the school ratings are based on one or very few factors, usually aggregate standardized test scores. Test scores are consistently disparate along socioeconomic lines, and it is well established that minority students are more likely than their white counterparts to live in poverty and go to school in poorer districts. Thus, such a one-dimensional view of a school’s performance, along with using a factor that is racially biased, seems to be a significant issue when displaying this information prominently on a house hunting website.

Modern Day “Steering?”

House hunting online has only become more popular in recent years. A joint study conducted by the National Association of Realtors and Google unveiled that 90 percent of home buyers searched online during their home buying process. Furthermore, the study found that 89 percent of new home shoppers used a mobile search engine at the onset and throughout their house hunting research. Currently, fair housing laws only affect those who sell housing, which are landlords and real estate agents. The laws do not appear to assign any sort of liability to websites, which are now being utilized across the country at a rapid rate.

Katie Curnutte, vice president of communications at Zillow, contends that these school ratings merely serve as a starting point for potential buyers to do further research and to connect with real estate agents. If the information provided is just neutral, it is difficult to argue that there is discriminatory intent. The color coding system in conjunction with readily accessible demographic data, however, could be a 21st-century form of “steering.” Given the popularity of online resources, resolving these issues to help combat housing segregation is of critical importance.

Conclusion

The rise of web platforms for home buying may be exacerbating a persistent issue in the fight for fair housing. Many advocates consider online databases with easily accessible school rating numbers to be part of a “legal gray area,” one with very little oversight. Moreover, it is apparent that housing and schools ratings are stuck in a cycle–encouraging housing patterns that maintain racial segregation, particularly through school budgets. The use of a color coding system by a website for local school districts–with green denoting “good” and red denoting “bad”–may be just as damaging as a casual conversation with a real estate agent steering people to live in certain communities.

It is no surprise that prospective homeowners have many concerns when it comes to purchasing a new property. It is one of the largest and most intimate investments a person can make. Home buyers with children in the public school system certainly have a right to be concerned about school quality. Striking a balance between honest information and activities that do not violate the FHA is imperative to ending housing discrimination and segregation. Moreover, drafting straightforward legislation to regulate house hunting websites and databases is the next step to ensuring the FHA remains applicable in the 21st century.

Resources

Primary

National Fair Housing Alliance: Unequal Opportunity–Perpetuating Housing Segregation in America

National Association of Realtors: The Digital House Hunt: Consumer and Market Trends in Real Estate

Additional

New York Times: Money, Race, and Success: How Your School District Compares

The Atlantic: The Concentration of Poverty in American Schools

NPR: Race, School Ratings and Real Estate: A ‘Legal Gray Area’

NPR: Interactive Redlining Map Zooms In On America’s History Of Discrimination

Realtor.com: Review of Housing Insights in Top Rated School Districts

National Association of Realtors: Steering, Schools, and Equal Professional Service

Washington Post: School Quality is Tied to Home Prices in New Study. But Other Factors May Affect Values

Nicole Zub

Nicole is a third-year law student at the University of Kentucky College of Law. She graduated in 2011 from Northeastern University with Bachelor’s in Environmental Science. When she isn’t imbibing copious amounts of caffeine, you can find her with her nose in a book or experimenting in the kitchen. Contact Nicole at Staff@LawStreetMedia.com.

The post School Quality and Property Values: Perpetuating Housing Segregation? appeared first on Law Street.

Affordable, safe housing is a huge concern for all populations. Traditionally, neighborhoods have been segregated along socioeconomic lines. However, even in modern cities, policy attempts to integrate communities through equal access housing have failed. Housing lotteries, through neighborhood preference programs, are now being employed by cities across the country to keep families in their neighborhoods.

Unfortunately, those same lotteries are meeting a pushback from the Department of Housing and Urban Development (HUD), which has stated that neighborhood preference and housing lotteries violate federal fair housing laws. In an interesting turn of events, the populations that fair housing laws are designed to protect are now being utilized to keep them out of their home neighborhoods. This comes as a surprise to many supporters of these anti-displacement programs, as the legislation was created to assist victims of segregation, not perpetuate it.

Federal Fair Housing Laws

In 1968, shortly after the assassination of Dr. Martin Luther King, Jr., Congress passed the Fair Housing Act (FHA) in response to concerns about racial segregation. The statute sought to address the issues created by residential segregation, while moving cities and towns away from unequal housing and economic conditions. It was initially enacted under Title VIII of the Civil Rights Act of 1968 and then ultimately codified under 42 U.S.C. §3601-3619. A 1968 Supreme Court ruling, Jones v. Alfred H. Mayer Co., held that the Civil Rights Act of 1968 prohibits racial discrimination by private and governmental housing providers. These policies established a framework for eradicating segregated housing.

Under the FHA it is unlawful to “refuse to sell or rent […] or otherwise make unavailable or deny, a dwelling to a person because of race, color, religion, sex, familial status, or national origin” or “to discriminate against any person in” making certain real-estate transactions “because of race, color, religion, sex, handicap, familial status, or national origin.”  Since the passage of the FHA in 1968, many cities have become more diverse. The FHA plays an integral part in avoiding the Kerner Commission’s grim prophecy that the “nation is moving toward two societies, one black, one white–separate and unequal.” The Act was later amended in 1988 to create certain exemptions from liability and expanded protected characteristics, including discrimination on the basis of disability or families with children.

“Fair housing protest, 1964” Courtesy of [Seattle Municipal Archives via Flickr]

Equal Housing and Discrimination

Problems regarding fair housing and discrimination are pervasive in communities across the country. HUD estimates that there are roughly two million cases of housing discrimination annually, but the actual number may be much larger. Many cases of housing discrimination are not reported. Moreover, studies conducted by HUD show that many residents are unaware of what activities are illegal under the FHA.

Despite all of the efforts to diminish segregation and discrimination in housing access, very little progress has occurred nationally. While the country has become more diverse than ever, residential housing patterns remain stagnant. Even with the passage of the FHA and the expansion of state laws protecting residents from housing discrimination, improvements in socioeconomic and racial seclusion have made few advances.

What is Gentrification?

No matter where one travels, there are segregated neighborhoods all over the U.S., particularly in metropolitan areas. Gentrification, or the arrival of  wealthier people in an existing urban district, has become common practice. This causes a litany of problems for the current residents of that community, including increased rents and property values, in addition to drastic changes to the community’s culture.

Researchers have been quick to note that the practice of gentrification is not inherently bad. Seeing a neighborhood with decreased crime, new investments, and increased economic activity are desirable, positive traits for any community. Conflicts occur because usually wealthier, white populations are given significant credit for “improving” neighborhoods, while simultaneously displacing poor, minority residents.

Gentrification has some common characteristics, though there is no technical definition for it. First, there is a change in demographics, leading to an increase in median income, decrease in household size, and a decline in racial minorities. Second, the real estate markets transform, increasing property values and the number of evictions. Third, there is a shift in land use, usually a decrease in industrial uses and an increase in offices, high-end retail, and restaurants. Lastly, a variety of character and cultural attributes change, such as landscaping, public behavior, noise, and nuisance.

Neighborhood and Community Preference

Many cities are facing serious roadblocks for making affordable housing available to low-income and middle-class residents. As property and rent increases, the ability of certain families to stay in a particular neighborhood decreases. Thousands of minority populations are being displaced by gentrification across the country. To combat this growing problem, some cities, like San Francisco, have tried to utilize neighborhood preference and housing lotteries.

Essentially, the program allows current residents to participate in a lottery for affordable housing units partially financed by the federal government. This gives those who currently live in a neighborhood a preference, a right of first refusal. Rights of first refusal are contractual rights that give a particular person or business entity the opportunity to enter into a transaction before a third party. Participants must still compete against other residents, but they have a better chance of remaining in their home neighborhood. In San Francisco, this meant setting aside 40 percent of units in subsidized developments for residents already living in the district or a half mile away. This would allows residents first dibs at living in the brand-new, partially federally-financed building.

Why Does Neighborhood Preference Violate Fair Housing Laws?

While neighborhood preference can be viewed as a noble program, it technically violates HUD’s fair housing laws. The fact that laws designed to assist minority populations are now being used to not keep them in their home neighborhoods creates an extreme incongruity. By employing neighborhood preference, HUD states that it actually maintains segregation rather than eradicating it and limits equal access to housing.

The main issue with these programs is that they give a priority to those already living in a particular district. In these specific areas, residents tend to be low-income minorities. Allowing those residents a preference continues to segregate neighborhoods. It also allows race to be an integral factor in the process, as the effect of allowing current residents to have a preference means that black tenants are more likely to receive the new units.

HUD noted via a spokesperson that the agency takes great care when reviewing programs that have noble intentions but end up with negative consequences. However, it was also noted that there was no record of HUD ever approving a neighborhood preference program.

San Francisco is not the only city experiencing these roadblocks in assisting low-income residents. In New York, a fair housing group has filed suit alleging that the city’s policy of using community preferences for affordable housing units perpetuates segregation. The pattern is national, with urban neighborhoods becoming increasingly whiter and more affluent.

Conclusion

While there are many positive aspects to transforming a neighborhood, the social, economic, and physical impacts of some changes may have negative consequences for current residents. Federal fair housing laws exist to eliminate segregated neighborhoods, but often come at a cost to current residents. The laws designed specifically to protect certain classes of citizens are now being utilized to push those same people out of their homes.

On September 22, 2016, HUD came back with a different answer after placing the San Francisco program under review. In a letter to the mayor, HUD decided that while the city cannot give priority to neighborhood residents for spaces in affordable housing projects, it will allow 40 percent of the units to be prioritized for residents who are at a high risk of displacement. Race will not be a factor for consideration in the selection process. This announcement immediately affects the Willie B. Kennedy senior apartment complex, which has roughly 98 units and more than 6,000 applicants. The lottery for this particular property had been delayed pending HUD’s decision.

This change demonstrates HUD’s willingness to acknowledge the serious consequences of displacement. It may not be the most ideal way to combat issues of equal access, but it certainly shows a sensitivity to keeping citizens in their neighborhoods. While neighborhood preference programs are out, it seems that “anti-displacement” preference programs are in.

Resources

Primary

U.S. Department of Housing and Urban Development: Fair Housing and Equal Opportunity

The Kerner Commission: Report of the National Advisory Commission on Civil Disorders

Legal Information Institute: Fair Housing Act

Additional

NPR: How ‘Equal Access’ Is Helping Drive Black Renters Out Of Their Neighborhood

PBS: What is Gentrification?

CivilRights.Org: Fair Housing Laws

SF Gate: Federal Agency OKs Preferences at New SF senior Housing Complex

Investopedia: Right of First Refusal

Nicole Zub

Nicole is a third-year law student at the University of Kentucky College of Law. She graduated in 2011 from Northeastern University with Bachelor’s in Environmental Science. When she isn’t imbibing copious amounts of caffeine, you can find her with her nose in a book or experimenting in the kitchen. Contact Nicole at Staff@LawStreetMedia.com.

The post Equal Access?: Neighborhood Preference and Housing Lotteries appeared first on Law Street.

In the gig economy, where rides, dates, and living rooms are outsourced, where services are offered by independent contractors who are not employed–but operate under the auspices of a larger conglomeration–who is responsible for mistreatment and discrimination against customers? The person directly discriminating, or the company whose platform allows room for discrimination? Airbnb–an application that connects travelers to the living spaces of locals, in lieu of traditional lodging–is grappling with these questions as users report being discriminated against.

Over the past year or so, as Airbnb has blossomed (the company is valued at $25 billion, with hosts in 34,000 cities, and 191 countries), travelers have increasingly been turned down by discriminatory hosts. A January study by the Harvard Business School offers data that buffers the anecdotal evidence: in the five American cities it covered, the study found African-American travelers received positive reviews 42 percent of the time. But 50 percent of white travelers received a positive review. Those numbers are identical when considering how often a traveler with a stereotypical African-American sounding name–Darnell, Rasheed, Tamika–was accepted in comparison to a stereotypical white or neutral name like Brad or Kristen.

Airbnb has terminated hosts who were found to violate the service’s tolerance policy–and federal law. But that does not mean the company is blameless for any wrongdoing on behalf of its hosts, and as affected users threaten to take their cases to court, Airbnb is taking steps to reform its methods and eliminate any room for discrimination and racism. A few weeks ago, Airbnb hired Laura Murphy, the former head of the ACLU’s Washington D.C. legislation office, to conduct a review of its ability to deal with incidents involving discrimination and racism. Her report is expected by September.

This summer, Airbnb’s ability to counter lawsuits brought about by its users will be tested: in May, a class-action discrimination suit was filed in the U.S. District Court in D.C. by Gregory Selden, a black man who claims he was denied by a host because of his race. Airbnb will respond to the lawsuit by July 13. When users sign into the service, they are prompted with a “class-action waiver,” which essentially ensures people waive their right to sue, or join class-action lawsuits agains the service.

It will be interesting to see how that protective tool holds up in court with the Selden case. According to Joanne Doroshow, executive director of New York Law School’s Center for Justice and Democracy, change will only follow if cases like Selden’s prove successful. “Class-action cases have been the only effective way to prove and remedy systemic discrimination because you can’t prove a pattern of behavior with individually filed cases,” she said.

Meanwhile, new players are entering the home-sharing market in efforts to address customers who are wary about encountering racism and discrimination on Airbnb. Stefan Grant launched Noirbnb–a service geared toward people of color, though they accept profiles from everyone–after he and his friend were greeted by a swarm of cops at the Airbnb property they were staying at in Atlanta. A neighbor thought they were burglars.

Alec Siegel

Alec Siegel is a staff writer at Law Street Media. When he’s not working at Law Street he’s either cooking a mediocre tofu dish or enjoying a run in the woods. His passions include: gooey chocolate chips, black coffee, mountains, the Animal Kingdom in general, and John Lennon. Baklava is his achilles heel. Contact Alec at ASiegel@LawStreetMedia.com.

The post #AirbnbWhileBlack: When Discrimination and the Gig Economy Intersect appeared first on Law Street.