Discrimination in RE Brokerage

David Goldsmith

All Powerful Moderator
Staff member

Service divide at forefront of Redfin discrimination suit​

Brokerage provides more offerings in majority-white neighborhoods, fair housing groups say​

Redfin has long emphasized its commitment to combating systemic inequality in the housing market, but critics say the discount brokerage contributes to discrimination by making it more difficult to buy homes in non-white communities.
As a lawsuit against the company drags on, additional information is being revealed about its alleged practices.
Bloomberg reported that Redfin is in negotiations to settle a lawsuit brought in 2020 by fair housing groups, which accused the brokerage of engaging in a form of redlining for providing additional services to buyers and sellers of homes above specific price thresholds in particular markets.

According to Bloomberg, the fair housing groups allege that Redfin provides sellers of homes above the set minimum prices with professional photos, 3D walkthroughs, data analysis and increased visibility. Homes below the price threshold either get referred to a “partner agent” or receive no services at all, potentially increasing commissions while driving down sales prices.

“While the actual minimum price varies… its impact is always the same — buyers and sellers of homes in non-white areas are far less likely to be offered Redfin’s services and discounts,” the complaint read.
Redfin has pushed back against accusations of redlining, a discriminatory practice in which services such as mortgages are withheld from communities of color.
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“Being fair is more important to Redfin than making money,” the company said in a statement to Bloomberg. “We recognize that systemic racism affects who can pay for a broker, a book, or an airline ticket, but using price to determine which homes we can sell is not only legally permitted, it is the only fair way to make that determination.”

The dynamic is particularly noticeable in Chicago, the fair housing groups say.
According to Bloomberg, an analysis detailed in the lawsuit found that in June 2020, Redfin was five times more likely to provide the best services in Chicago areas where at least 70 percent of residents were white, versus where at least 70 percent of residents were not white.

Redfin allegedly made brokerage services available for homes listed at $400,000 or more within Chicago city limits, but $275,000 or more in majority-white DuPage County. In majority-Black Detroit, the threshold for Redfin’s services was $700,000. In majority-white suburbs of Oakland and Wayne counties, it was $250,000.

One former agent, meanwhile, said Redfin would provide services for listings in excess of $225,000 in Chicago’s South Loop, but not for similar properties in more racially diverse Woodlawn.
After the lawsuit was filed in 2020, Redfin CEO Glenn Kelman addressed the allegations in a staff email.
“Our long-term commitment is to serve every person seeking a home, in every community, profitably,” he wrote. “The challenge is that we don’t know how to sell the lowest-priced homes while paying our agents and other staff a living wage, with health insurance and other benefits.”

Redfin has not filed a formal response to the complaint.
According to RealTrends, Redfin is the fifth-largest brokerage in the country. In 2020, the company recorded $37 billion worth of sales volume.
 

David Goldsmith

All Powerful Moderator
Staff member
In 2020, Wells Fargo rejected nearly half its Black applicants for a mortgage refinance
One of the country’s biggest mortgage providers turned down nearly half of the refinance applications sent in by Black homeowners while approving almost three-quarters of those sent in by white applicants in 2020.
According to a Bloomberg News analysis, Wells Fargo fell well below industry averages when it came to lowering interest rates through a home refinance to African-Americans, who were approved 71 percent of the time by all other lenders. Wells Fargo’s 47 percent approval rate gave it the worst record among major lenders when considering refinancings for Black homeowners.

Sifting through the information made available via the Home Mortgage Disclosure Act, which included data for 8 million completed applications to refinance conventional loans in 2020, Bloomberg found Wells Fargo was more sparing when it came to approving refinances overall: it okayed 72 percent of requests from white homeowners vs. an 87 percent approval by all other lenders; 67 percent to Asian lenders vs. 85 percent; and 53 percent to Hispanic lenders vs. 79 percent.

Wells Fargo didn’t dispute the numbers, according to the report, with the San Francisco bank claiming it treats all of its potential customers the same, has a more selective process for approving loans and that “additional, legitimate, credit-related factors” were responsible for the differences in numbers.

Experts say the refinancing gap makes it more difficult for Black families to use their real estate holdings to build wealth. Andre Perry, a senior fellow at the Brookings Institution, told the news site not getting approval to refinance means Black homeowners have fewer resources to invest in their children, start businesses, renovate their homes, or buy additional homes. Perry’s 2018 study found that the average Black home was valued at $48,000 less than its white equivalent — a differential that amounts to $156 billion in missing Black wealth, according to the report.

In the past, the U.S. Justice Department has gone after banks for lending practices that can raise expenses for minority borrowers. Authorities leveled penalties against U.S. lending giants after studies into the 2008 housing crisis suggested there had been discriminatory treatment. In 2012, Wells Fargo agreed to pay more than $184 million to settle federal claims that it charged Black and Hispanic homeowners higher fees and interest rates after unfairly steering them into subprime mortgages. The bank didn’t admit to any nefarious business practices and said it treated all customers fairly.

In March of 2017, Wells Fargo agreed to pay $110 million to settle a national class-action lawsuit that claimed its employees opened more than 2 million deposit and credit-card accounts without customers’ permission since 2011, according to published reports.
 

David Goldsmith

All Powerful Moderator
Staff member

Compass settles discrimination suit, bumps Section 8 commissions​

Housing Rights Initiative: Deal sets “important precedent” for real estate​

A year after watchdog group Housing Rights Initiative sued Compass for discriminating against tenants using housing vouchers, the brokerage agreed to put money toward righting that wrong, promising bigger commissions to agents for Section 8 leases.
The incentive stems from a settlement the parties reached Wednesday.

Compass also agreed to add training so brokers would understand voucher programs and how to file paperwork. Plus, the brokerage said it would educate first-time homebuyers who are becoming landlords on tenants’ rights to use vouchers.

HRI’s suit named 88 brokerages and landlords that dismissed callers who said they were looking to rent with subsidies. It is illegal to do that, but some landlords are known to not want voucher holders, leading brokers to assume they would be wasting their time by showing those apartments to such prospective tenants.

The nonprofit watchdog’s founder and executive director, Aaron Carr, would not disclose how much more Compass brokers would be paid for leases involving Section 8 or other rent subsidies.
HRI said it has settled with several other firms. Some have agreed to post signs in their offices advertising that vouchers are welcome, and others have reserved apartments specifically for voucher holders.
The court-mandated commitments come as city agencies tasked with clamping down on source of income discrimination have struggled with budget cuts and staffing shortages, City Limits reported.
Carr said he is hopeful that the deal with Compass, the country’s largest brokerage, establishes a standard for the industry.

“This agreement sets an important precedent that will reverberate across the real estate sector and put pressure on other real estate companies to reform their discriminatory business practices,” he said in a statement.
Compass did not comment in time for publication.
 

Upstairs Realty

Well-known member
I have worked with exactly one voucher-holding client in my life, and was not successful in finding him a rental. Even with the subsidy, his budget was not high, and we were basically going through classified ads which say, over and over, "no vouchers."

Here's a random example:


I heartily support Fair Housing, and I agree strongly that brokerage services should not be available for rich people only, but the vouchers-not-working problem needs to be addressed at the landlord level as well.
 

David Goldsmith

All Powerful Moderator
Staff member
I'm pretty sure the vouchers demand an agency inspection of the unit and in that particular case perhaps it's another "illegal" basement unit and the owner knows would get rejected? People tend to put things in ads after having negative experiences. Back when most advertising was the Sunday NY Times Real Estate section is saw an ad with "Absolutely no dogs!"
I wondered why the agent would wast valuable ad copy with that since most ads were limited to 5 lines (since NYT charged by the line). Then I found out there had just been a board rejection because the applicant had a dog. So it was mostly about the agent not having done their homework on the previous deal and no being gunshy.
In this case the "no vouchers" wording would be a red flag to me to check if the unit was legal.
 

Upstairs Realty

Well-known member
Excellent point David -- I wish I had considered that at the time.
 

David Goldsmith

All Powerful Moderator
Staff member

Redfin settles redlining lawsuit for $4M​

Brokerage will eliminate minimum home price for providing services​

Redfin will fork over $4 million to settle a discrimination suit that claimed the company failed to provide brokerage services for homes listed below a certain price, a practice that plaintiffs dubbed “digital redlining.”
The suit, brought by the National Fair Housing Alliance in 2020, alleged that under the firm’s minimum home price policy, communities of color received fewer services and discounts than homebuyers or sellers in predominantly white areas.

To address those claims, Redfin agreed to end the policy and said it would no longer decline to refer buyers or sellers viewing homes below a certain threshold to partner agents — those employed by a brokerage affiliated with Redfin.
Although the firm will no longer base referrals on strict price caps, it will continue to use “price thresholds” to determine whether to connect buyers and sellers with Redfin brokers.
A company spokesperson said connecting clients with brokers based on price allows Redfin to manage agent capacity, as the firm often fields more requests than it can handle.

As an added check on potential discrimination under that system, Redfin agreed to implement a “monitoring and alert system” that will flag when minimum price points in communities of color exceed those in majority-white neighborhoods.
Redfin will establish a set of potential corrective actions to address any discrepancies that arise between white and nonwhite areas. Under the agreement, the firm has six months to present that corrective action plan to NFHA, which can then suggest tweaks.
The brokerage, which admitted no wrongdoing, also agreed to ramp up diversity hiring initiatives by building relationships with nonwhite real estate trade groups, holding job fairs at historically black colleges and recruiting from realty firms owned by people of color.

Prior to the lawsuit, Redfin employees criticized the firm for nepotism. Agents said those practices showed the company was not prioritizing diversity in its hiring.
CEO Glenn Kelman told The Real Deal that Redfin was combatting those allegations by advertising jobs to candidates of color for three months before opening them to a wider pool of candidates.
 
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