Redlining and steering continue to plague housing. So where’s NAR?

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As you’d expect, the National Association of Realtors is backing its members, but sadly it is failing homeowners and, based on its lack of action, it seems to lack a desire to make meaningful change to reduce discrimination via steering and redlining. I’m starting to lose faith in its ability to change.

It’s not a good time to work at NAR. Lawsuits, investigations and slumping sales are leading to dropping membership numbers. It’s a bit of a dumpster fire. Bob Goldberg, the CEO of NAR, cannot be enjoying work right now.

However, in sharp contrast, Rick Reilly of the NAR Membership Policy and Board Jurisdiction Committee, which oversees NAR membership requirements, said last month “It’s a great day for fair housing.” I’m pretty sure he was not trying to be ironic. His comments came after the committee voted to adopt new rules and guidelines aimed at reducing discriminatory practices in housing.

The leadership at the nation’s largest trade organization has been slow to react, and reacted with meaningless, non-impactful changes. What most people don’t know is that redlining, steering and discrimination continue to plague the housing industry. This latest move accomplishes next to nothing.

NAR and racism have a long history together. The National Association of Realtors no longer denies this. They admitted fault when NAR formally apologized for being racist.

Officially, NAR knows there is an issue — that’s not the problem. The problem is that NAR and its membership have a pattern of doing very little that moves the needle — and, as you would expect, this apology did not resolve anything. And there’s an increasing supply of examples showing the significance of the problem.  

Ruin the suburbs

A few years ago, The YouTube show “Adam Ruins Everything did a great episode on redlining where he explains that “suburbs are white, due to decades of racist policy that affect us to this day.”

This video is gold, however, it ends with a punch in the gut and no next steps to get it right. Is this where NAR steps in to save the day? Not exactly. 

Long Island divided

Immediately after the Adam Ruins video was released, Newsday released the amazingly shocking and appalling Long Island, New York, investigation which revealed the news story that broke in 2019, where the investigators used “paired testing,” sending two different people to the same real estate agent. One of them was white. One of them was a minority.

In 49 percent of cases, African American homebuyers were shown fewer listings and steered away from white neighborhoods.

Awkward Senate hearings

After the Long Island divided investigation, our government was actually pretty quick to react, holding hearings that were incredibly embarrassing to the real estate industry, and raising public awareness of the issue. While helpful to the overall direction of the cause, this alone did little to make change.

Politicians love to jump in to help when a spotlight reveals a significant problem for voters. We should expect representatives with diverse constituencies to step forward as this continues. 

Lending lawsuits

Until now, real estate companies and their associations have avoided legal trouble because there is such a strong precedent for lender-related lawsuits. Attorneys are following a script that works in mortgage. There’s nothing stopping a similar pattern from emerging on the real estate side of the coin. 

  • As recently as March of 2023, Park National Bank in Ohio lost a $9 million judgment for discriminatory lending practices. 
  • In January of 2023, in Los Angeles, the DOJ secured a $31 million victory over City National Bank on discriminatory lending practices. 
  • Providence Bank in St. Louis, Missouri, settled for $10 million in 2019, after a suit was brought alleging discriminatory lending practices. 
  • In United States v. Associated Bank, N.A., the defendants reached a settlement of $200 million with the DOJ over allegations of redlining in 2015.
  • The city of Philadelphia filed a lawsuit against Wells Fargo in 2017, accusing the bank of discriminatory lending practices, including redlining. The case is ongoing.

Continuing education

In my home state of Colorado, it takes a whopping 1500 hours of training just to do hair as a professional barber and a mere 168 hours to become a real estate agent. Pretty gross when you think about a $40 haircut vs $400,000 house.

So the real estate bar is low. How low is the continuing education? Currently, the only training NAR requires of its members is a 2.5-hour Realtor Code of Ethics training every three years. This covers all of the Code of Ethics. That’s a whopping 0.0004 percent of working hours over three years. 

The evidence above illustrates the significant failures of the current policy. Additional training on fair housing is obviously needed. 

The new policy states “That NAR requires two (2) hours of fair housing training for new member applicants, and on a recurring basis for existing members every three (3) years, coinciding with the Code of Ethics training cycle and beginning in 2025, as a condition of Realtor membership.”

Two hours of education over three years is a joke. It’s a slap in the face. This will not improve anything on any level. NAR is simply placating via policy.

A sinking feeling

If you reveal a problem like a leak in your boat, the proper response for most people would be to find the source of the leak, patch it, remove the water, look for other similar potential issues and then monitor them going forward. Yet, there is another option: Let the boat fill with water, rot away slowly and sink.

NAR has basically selected option two. They didn’t find the source of the leak, patch it nor look for other potential problems. What they did do is establish a program that says “boat leaks are bad.”

Lessons not learned

The sweeping changes forced upon the mortgage industry following the great financial crisis came about because the mortgage industry did not have leadership strong enough to make the changes that would deal with the systemic issues at hand. NAR is the largest trade organization in the United States and if its leadership can’t or refuses to see this threat as significant, they too will see the wrath of government rules and restrictions that mortgage dealt with more than a decade ago.

The Attorney General is focused on eradicating the problems and has been focused on lending, but I’d wager that the real estate industry is next on the chopping block. 

Two hours of education is not a meaningful change. Addressing discriminatory practices such as steering and redlining with meaningful change requires a comprehensive approach involving collaboration between various stakeholders, including policymakers, lenders, community organizations and advocacy groups.

Since NAR has not taken the lead, the government will eventually step in. Bill Chee wouldn’t believe that the hungry lions over the hill were actually ineptitude and apathy within their own home on Michigan Avenue.

Chris Drayer is co-founder of Revaluate which segments consumers for marketers by propensity to move.

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