By Max Besbris and Jacob W. Faber (click here for the pdf)
The Trump-Pence administration aggressively stunted efforts to integrate communities and redress historical inequalities in housing. The incoming Biden-Harris administration has committed to ending discriminatory practices in the housing market and, on paper, many of the goals it has outlined could make housing more accessible. This is particularly true regarding efforts to ensure homeseekers of color receive fair mortgages and avoid foreclosure. In this essay, we call for more attention to processes that typically occur far in advance of mortgage provision and are rife with implicitly and explicitly racist practices: the search for housing. We outline why furthering fair housing policy requires more regulation of real estate agents and make suggestions on how to do so.
Real estate agents are involved in nearly 90% of residential real estate transactions in the U.S. and study after study has documented their discriminatory practices. While the most pernicious forms of discrimination, e.g., refusing to meet with homeseekers of color, have ebbed, agents still regularly steer white homeseekers away from neighborhoods of color, reveal different information and opinions about housing and neighborhoods to white homeseekers and homeseekers of color, and rely heavily on racial stereotypes when selecting housing on behalf of prospective buyers (Besbris and Faber 2017; Korver-Glenn 2018). State-level policy makers have taken note—the NY State Senate recently held hearings to investigate discrimination by real estate agents on Long Island uncovered by Newsday in 2019—and the Biden administration could also combat these discriminatory practices by agents in multiple ways.
First, recent research shows that a large part of the problem is woefully inadequate education (Besbris 2020). Real estate agents are required to know very little about fair housing laws or their intent. While agent education and licensure are regulated at the state level, and some professional associations offer their own trainings, the Department of Housing and Urban Development should establish national standards and condition block grant distribution on their adoption. Some states require as few as 30 hours of classroom instruction to become a licensed real estate salesperson. This is not nearly enough, considering the effects agents have on housing market and neighborhood demographic outcomes. But more education will only work if the content of that education is better defined and regulated. Audits of licensing classes in New York state revealed that agents-in-training are simply told to remember the dates of the passage of fair housing laws and protected categories. Far more education should be dedicated to understanding segregation—what it is and how it is harmful.
Second, a new administration should provide more funding for and prioritize testing (Oh and Yinger 2015). Paired testing (auditing) of real estate agents, while perhaps time consuming, is not prohibitively expensive as evidenced by the Urban Institute’s recent studies of discrimination against same-sex couples and homeseekers with children. The growth of the online market for housing also offers opportunities for large scale testing for relatively small investments (Besbris et al. 2018). Under a new administration, HUD could implement regular testing of real estate agents in housing markets across the country. This would help identify where discrimination is more or less pervasive and could also serve as the basis for systemic enforcement actions by the Department of Justice.
Third, a new administration should fund alternative home search services. Past research has shown that rental homeseekers who use housing counselors during their search find better quality housing in less segregated neighborhoods and tend to stay in their new homes for longer (Darrah and DeLuca 2014). Counselors could also benefit homebuyers. Real estate agents who profit from brokering transactions have incentives to close deals quickly and for as a high a price as possible. As a 2020 Department of Justice lawsuit against the National Association of Realtors alleges, such conditions lead to obfuscation and exploitation (see Akerlof and Shiller 2015; Yinger 1995). Put another way, agents are incentivized to steer and share information in unequal ways since it facilitates closing deals quickly. Fostering the development and support of alternative housing search intermediaries like housing counselors and community-based housing groups that do no profit from brokering home sales or lease agreements should become a policy priority (Krysan and Crowder 2017).
Lastly, the federal government should institute reporting rules for real estate agents similar to those required of mortgage lenders by the Home Mortgage Disclosure Act. Agents should provide information on every client they work with including race, gender, age, household composition, and current address. It is key that these rules also require agents to report the outcomes of their interactions with buyers and sellers. For buyers, agents should report information on the properties discussed and shown, matched with buyer demographics, and including listing price, address, and square footage, as well as the amount of any offer made by a buyer, and, if the property was purchased, the final price. For sellers, agents should report on all offers received. Such information is critical to understanding the scale, scope, and impact of racial steering.
Some of these proposed policies will likely be received with skepticism by professional real estate associations. However, the new administration should fight for them. Furthering fair housing will require not only a recommitment to existing policies but also implementing new ones.
Max Besbris (besbris@wisc.edu) is an Assistant Professor at the University of Wisconsin-Madison; Jacob W. Faber (jacob.faber@nyu.edu) is an Associate Professor at New York University’s Wagner School. Jacob Faber is a member of PRRAC’s Social Science Advisory Board.
References
Akerlof, George and Robert Shiller. 2015. Phishing for Phools. Princeton: Princeton University Press.
Besbris, Max. 2020. Upsold. Chicago: University of Chicago Press.
Besbris, Max and Jacob William Faber. 2017. “Investigating the Relationship Between Real Estate Agents, Segregation, and House Prices: Steering and Upselling in New York State.” Sociological Forum 32:850-873.
Besbris, Max, Jacob William Faber, Peter Rich, and Patrick Sharkey. 2018. “The Geography of Stigma: Experimental Methods to Identify the Penalty of Place.” Pp. 159–77 in Audit Studies: Behind the Scenes with Theory, Method, and Nuance, edited by S. Michael Gaddis. Springer International.
Darrah, Jennifer and Stefanie DeLuca. 2014. “‘Living Here Has Changed My Whole Perspective’: How Escaping Inner-City Poverty Shapes Neighborhood and Housing Choice.” Journal of Policy Analysis and Management 33:350-384.
Korver-Glenn, Elizabeth. 2018. “Compounding Inequalities: How Racial Stereotypes and Discrimination Accumulate Across the Stages of the Housing Exchange.” American Sociological Review 83:627-656.
Krysan, Maria and Kyle Crowder. 2017. Cycle of Segregation. New York: Russell Sage.
Oh, Sun Jung and John Yinger. 2015. “What Have We Learned from Paired Testing in Housing Markets.” Cityscape 17:15-60.
U.S. v National Association of Realtors, Case No. 1:20-cv-3356 (D.D.C. 2020).
Yinger, John. 1995. Closed Doors, Opportunities Lost. New York: Russell Sage.
