Homeownership represents the ultimate American dream — success, safety, opportunity and wealth. Despite numerous legal obstacles and the longstanding history of racism, many families of color still managed to purchase homes, creating the largest source of wealth for their families.
But homeownership has its challenges, which often intensify when determining how the government and commercial housing industry value Black-owned homes. These homeowners often face inflated property tax assessments and the undervaluing of their homes when it’s time to sell or refinance. The Maryland Department of Assessments and Taxation methods consistently lead to higher assessments for properties in Black neighborhoods.
Two appraisal methods are commonly used in Baltimore — the mass appraisal and the income approach. Both can be unreliable, considering many residential homes are mixed with commercial properties. Rental homes are considered commercial properties, so homeowners living in predominantly commercial areas will often have their property assessed using a method that considers the revenue generated from rental properties in that area. This poses a problem because business owners are not good at reporting the revenue they generated and lost, and homeowners don’t make money from businesses in their neighborhood. So, their homes should not be valuated as such.
The neighborhood adjustment multiplier also creates equity issues regarding Baltimore property assessments. Many urban neighborhoods are located near a waterfront, golf course or other attraction, such as The Maryland Zoo. Such attractions can raise how properties are assessed, yet these attractions may not increase property values. In both assessment approaches, homeowners in these communities end up being assessed a higher rate, although they don’t benefit by the businesses or attractions that increased the assessment rate.
Sometimes, due to properties being mass appraised, rather than individually inspected, older Baltimore homes are overappraised. For instance, a small five-bedroom home built in the 1980s may be assessed as if it were a larger five-bedroom home built in 2023. This results in higher-income communities being assessed at lower rates.
In recent years, legislative and political actions have sought to address the blatant housing discrimination of the past. During the 100th anniversary of the Tulsa, Oklahoma, race massacre, President Biden said he would launch an interagency initiative to combat bias in home appraisals.
A year later, in June 2022, the Maryland General Assembly (Chapter 654, Acts of 2022) authorized the Task Force on Property Appraisal and Valuation Equity to address the persistent mis-valuation of property that families of color owned. The task force was charged with developing strategies to help ensure that: governmental oversight and industry standards promoted valuation equity; appraisers would be trained to combat valuation bias; barriers for people of color to enter the appraisal profession would be removed; a model would be devised to help correct the valuation process; and bias related to automated valuation models and alternative property valuation methods would be eliminated or reduced.
The task force was established to identify legislative or other policy recommendations to reduce bias in valuations through enforcement, compliance or other methods.
The decree of the task force is encouraging. It is no secret that in areas with a larger Black or Latinx population, the property tax assessments are higher. If a family wants to appeal their property assessment, the appeals process becomes another burden. The property tax system was structured to disadvantage Black Americans during the Jim Crow era, and its vestiges are still entrenched in policies today.
The cost of implicit racial bias in the housing market has undervalued Black-owned homes by an average of $48,000, amounting to $156 billion in cumulative losses. Homes in majority Black neighborhoods are valued at roughly half the price of homes in neighborhoods with few to no Black residents. The devaluation of assets and neighborhoods is often linked to the negative perceptions of Black people resulting in a mass loss of wealth for those families.
It is imperative that Maryland’s Task Force on Property Appraisal and Valuation Equity recognizes the deeply entrenched inequities in both the government property assessment process and the private appraisal market. Questioning and reframing industry standards is critical to combating these unfair property valuations.
Aja’ Mallory is a staff attorney at the Maryland Volunteer Lawyers Service. Her practice focuses on housing and consumer issues for Marylanders of limited means.