This is the fifth  episode in our new video series covering Implicit Bias principles, and provides a sneak peek into the new continuing education (CE)  requirements that apply to real estate agents and brokers with licenses expiring on or after January 1, 2023.

This episode quantifies the reduction of real estate services which results from implicit discrimination. The prior episode covers the wealth gap.

Implicit bias from real estate licensees

On top of the economic reasons mentioned above, minority households face discrimination in the form of:

  • intentional mortgage discrimination;
  • implicit (and sometimes explicit) discrimination from real estate professionals; and
  • a higher likelihood of defaultand foreclosure.

Implicit discrimination ensures minority homebuyers and renters are:

A landmark study conducted by the Department of Housing and Urban Development (HUD) measured implicit racial discrimination by comparing the experiences of white testers against testers who were Black, Asian or Latinx, each with identical socioeconomic profiles.

Testers were instructed to contact housing providers and/or real estate licensees about recently advertised rental or sales listings. For consistency, two testers contacted the same provider about the same listing. Testers had the same gender, age, family composition and financial characteristics, with their race the only contrasting factor.

This test was repeated 8,000 times across 28 major U.S. metros, including five metros in California.

Testers obtained listing information and scheduled viewings in equal measure, demonstrating that blatant racial discrimination has fallen significantly. But this was not true for the quieter, but equally harmful, implicit bias.

Compared to white buyers and renters responding to the same listings:

  • Asian clients were shown 19% fewer for-sale and 7% fewer rental listings;
  • Black clients were shown 18% fewer for-sale listings and 4% fewer rental listings; and
  • Latinx clients were shown 7% fewer rental listings and roughly the same number of for-sale listings.

While blatant refusal to show properties to Black, Asian or Latinx clients was not an issue identified in the study, licensees exposed all non-white participants to fewer available units than their white counterparts. This subtle form of discrimination still has the adverse effect of providing Black, Asian and Latinx households with fewer options, limiting not just housing choices, but educational and economic access.

Economic inequity

Racial housing discrimination is not just morally and ethically reprehensible. It’s also bad business. Implicit racial discrimination hinders sales volume in the real estate market, and also ties up rental activity.

Importantly, it was real estate agents, not owners, who engaged in the implicit discriminatory practices found by the HUD investigation.

The study showed that implicit racial discrimination impacts minority renters and buyers by:

  • limiting their access to available housing;
  • making the housing search longer, costlier and more difficult;
  • hampering economic mobility by limiting a minority buyer’s housing choices in areas with access to better employment and quality schools; and
  • reinforcing the de facto racial segregation (redlining) that has gripped many U.S. cities in the years since outright segregation was outlawed.

Further, explicit bias still exists in the real estate profession, though less so today. In these rarer and more overt cases, real estate agents refuse outright to show properties or take applications from members of protected classes.

But the harm of racial, ethnic, and economic segregation reaches far beyond just those who are isolated from the market by these practices. It drags down the larger economy of an entire region – and with it, real estate sales volume – according to research published in the Journal of Urban Studies.

Metropolitan areas with high levels of racial and job skill segregation suffered reduced rates of short- and long-term economic growth between 1980 and 2005, the Urban study found. The future of any community is no less endangered by segregation.

Worse, poverty is very costly to a local economy. Housing discrimination and racial segregation only exacerbate those costs, cutting into the incomes of all people with local vested interests.

California’s homeownership rate is low for all ethnicities, typically averaging roughly ten percentage points below the U.S. homeownership rate.

The number one enemy for real estate professionals is a low homeownership rate. With fewer homebuyers and sellers, real estate agents, brokers and mortgage loan originators (MLOs) — along with all the other professionals involved, like appraisers, escrow agents and title insurance officers — have fewer closings, fewer fees and lower incomes.

Doing your part

How can you get involved and help more Latinx, Black and Asian households break the cycle of implicit bias and achieve homeownership?

Real estate agents — the gatekeeps to real estate ownership — need to be vigilant for signs of predatory lending. Agents can make sure all clients are fully aware of the details of the mortgage they are agreeing to pay back. The Consumer Financial Protection Bureau’s (CFPB’s) mortgage shopping tools are a safe place to direct homebuyers for homebuying and mortgage guidance.

Real estate professionals also need to maintain high anti-discrimination standards by following the laws set out in California’s Unruh Civil Rights Act.

To ensure brokers, agents, MLOs and landlords don’t violate anti-discrimination law — even unintentionally — professionals need to:

  • ask the same questions of all applicants;
  • keep records of client interactions; and
  • when in doubt, contact a local fair housing expert for advice — find a list of experts at HUD’s website.

Finally, licensees can get involved by making sure local housing inventory continues to match homebuyer and renter demand. This will keep costs in check for all demographics and improve access to homeownership for everyone. Do this by attending local city council meetings and advocating for more housing, builder incentives and common-sense zoning.

Editor’s note – firsttuesday was one of the first schools in California to obtain DRE-approval for the new implicit bias training and expanded Fair Housing course.

To enroll, visit the order page.