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Devaluing Black neighborhoods: Redfin accused of the latest form of redlining | COMMENTARY

A Redfin "for sale" sign stands in front of a house Wednesday, Oct. 28, in Seattle. Several fair housing organizations accused Redfin of systematic racial discrimination in a lawsuit Thursday, saying the online real estate broker offers fewer services to homebuyers and sellers in minority communities, a type of "digital redlining" that has depressed home values and exacerbated historic injustice in the housing market.
A Redfin "for sale" sign stands in front of a house Wednesday, Oct. 28, in Seattle. Several fair housing organizations accused Redfin of systematic racial discrimination in a lawsuit Thursday, saying the online real estate broker offers fewer services to homebuyers and sellers in minority communities, a type of "digital redlining" that has depressed home values and exacerbated historic injustice in the housing market. (Dreamstime/Dreamstime/TNS)

The remnants of decades old redlining policies that starved Black neighborhoods of capital investment are still very much alive. Neighborhoods once marked in red on maps by bankers and realtors as high risk areas are in many cases still struggling to catch up in value to white neighborhoods that were systemically given an advantage. Today, these neighborhoods are low to moderate income, according to one analysis by the National Community Reinvestment Coalition, and located in cities with incessant economic inequalities and extremely segregated neighborhoods. The home values also tend to be lower in these neighborhoods and the houses older.

Now real estate services company Redfin Corporation has been accused by several housing groups, including the National Fair Housing Alliance, of perpetuating the problem with a form of modern-day “digital redlining.” The groups filed a lawsuit that accused Redfin of offering its services in several cities, including Baltimore, to white neighborhoods at much higher rates than neighborhoods mostly made up of residents of color. This was enabled by a policy that set minimum listing prices for housing markets, under which the company would not offer any real estate brokerage services to buyers or sellers.

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Guess which neighborhoods fall below those requirements? In Baltimore, the company was 5.73 times more likely not to offer service in “extremely nonwhite ZIP codes” and 6.7 times more likely to offer its best services in “extremely white” ZIP codes, according to the complaint. The result was a “discriminatory stranglehold on communities of color,” the lawsuit alleges. Redfin CEO Glenn Kelman defended the company’s practices in a note to employees and contended no laws were broken. He also said it didn’t make sense financially to sell lower-priced homes. Doing so would mean he couldn’t pay his workers a fair wage, he said. Yet, somehow, plenty of other real estate companies have managed it to make do on such a model, selling higher volume to make up for lower prices.

Why does any of this matter? Because if the allegations are found to be true, Redfin engaged in discriminatory practices that devalued neighborhoods based on race and potentially helped widen the generational wealth gap experienced by African Americans and other people of color in this country. By essentially steering people away from Black neighborhoods to white neighborhoods, it lowers the odds of houses selling. The more people who look at a house, the better the chance of finding a buyer. The fewer people who know about a house, the longer it stays on the market. And anyone who has bought a home knows people look skeptically at houses that take too long to sell. When demand is reduced, values also go down, and neighborhoods appear unattractive to potential buyers. Redfin is potentially putting Black and brown neighborhoods at a disadvantage from the get go.

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Homeownership is one of the easiest ways to build wealth, if your house increases in value. It can have the exact opposite result if the houses in your neighborhood stay artificially stagnant or even decline in value. Black neighborhoods are already widely undervalued. In the average U.S. metropolitan area, homes in neighborhoods where the share of the population is 50% Black are valued at about half that of homes in neighborhoods with no Black residents, according to a Brookings Institution Gallup study. And it’s not always because the neighborhoods are of different caliber. Homes of similar quality in neighborhoods with similar amenities are worth 23% less in majority Black neighborhoods, the study found. Lower accumulation of wealth makes it harder to: pay college tuition so the next generation has a step ahead, invest in businesses or the stock market, sock away money for retirement and save enough to pass on wealth through inheritance.

Of course, even if Redfin is found culpable, it didn’t create the racial housing dilemma on its own. Decades of racist covenants and laws, of which Baltimore had some of the strictest, have helped create the housing market that we have today. As the lawsuit alleges, Redfin’s practices often hurt "the very communities that have been battered by over a century of residential segregation, systemic racism, and disinvestment. " And other companies have engaged in redlining practices as well. In 2012, the U.S. Department of Justice reached a $175 million settlement with Wells Fargo over accusations of discriminatory lending practices that affected about 1,000 families in Baltimore.

The housing advocacy groups want relief under federal civil rights laws and for Redfin to abandon the minimum requirements. Even if the housing services company isn’t found guilty by a court, we hope they find a way to serve every neighborhood in Baltimore and follow the most equitable business practices it can.

The Baltimore Sun editorial board — made up of Opinion Editor Tricia Bishop, Deputy Editor Andrea K. McDaniels and writer Peter Jensen — offers opinions and analysis on news and issues relevant to readers. It is separate from the newsroom.

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