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Category: Banking

Introducing the Brookings and Ashoka Collaborative Innovation Challenge: Valuing Homes in Black Communities

Introducing the Brookings and Ashoka Collaborative Innovation Challenge: Valuing Homes in Black Communities | Speevr

The time has always been right to address discrimination in housing. But since the release of the 2018 Brookings report, The devaluation of assets in Black neighborhoods—which showed homes in Black-majority neighborhoods are priced on average $48,000 less than comparable homes in white-majority neighborhoods—research, social activism, and legislative action have spurred a reckoning. The real estate industry has had to reckon with common practices that extract wealth from families simply for living in Black neighborhoods.

Lower home prices in Black neighborhoods reflect how much we value their residents. The problem of housing devaluation requires input from a wide range of actors across multiple sectors, including the people closest to the problem; but they have less resources and power to engage with powerful people who influence policy. Consequently, we must financially incentivize and empower local leaders, firms, and nonprofits to work alongside well-resourced institutions to find a new generation of solutions.
To empower local stakeholders and combat housing devaluation, the Brookings Institution is joining forces with the social entrepreneurship organization Ashoka to provide opportunities and financial incentives of up to $100,000 for people who are proximate to the problem so that additional seats can be pulled up to the decisionmaking table. This collaborative challenge, Valuing Homes in Black Communities, begins this week.
What do we mean by devaluation?
After carefully attending to social conditions like education, crime and walkability, our research found that homes in Black-majority neighborhoods across the country are priced, on average, approximately 23% or $48,000 less than similar homes in similar social conditions in mostly white areas, where the share of the Black population are less than a percent. In some specific metropolitan areas, the price difference is even more pronounced. For instance, in the Lynchburg, Va. metropolitan area, we see an -81% difference between average home prices in Black-majority and white neighborhoods. In the Rochester, N.Y. metro area, there is a -65% difference. In the metro area with the largest Black population, Detroit, Mich., there is a -37% disparity.
For the millions of residents who live in Black-majority neighborhoods, this devaluation means less money for critical municipal services like public schools and policing. Less equity in a home translates into less cash for ever-increasing college tuition, thus leading to more student loan debt. And lower value on our homes also means less capital to start a business. Our research finds that the $156 billion in lost revenue could have started 4.4 million businesses, based on the average amount of capital Black people use to start their firms.

Since the release of this report, there have been congressional hearings, additional studies and news reports corroborating our conclusion that racial bias significantly influences home values. The Biden Administration has acknowledged Brookings’s devaluation research in various memoranda, and the U.S. Department of Housing and Urban Development recently announced an interagency task force on appraisals. This came right before the government-sponsored enterprise Freddie Mac released a study showing systemic racial bias among appraisers. The acknowledgement of this issue by the highest levels of government is appreciated and encouraging. But we believe that solutions must come from people who experience and combat discrimination on the daily basis.
Correcting home values must go beyond appraisal regulation
After our devaluation report was released, people’s attention immediately shifted to the appraisal industry. Appraisers are the professionals who explicitly assess value. So, it is understandable why the industry garnered scrutiny. In 2019, one of this blog’s authors testified in Congress along with representatives from the Appraisal Institute and the Appraisal Foundation, two organizations that help certify and regulate appraisal professionals. When Rep. Al Green of Texas asked the panel to raise our hand if we believe “discrimination plays a role in the devaluation of property in neighborhoods that are predominated with minorities,” I was the only one who raised a hand.
If you have a structural innovation that fully values homes in Black communities, please join the Ashoka-Brookings collaborative challenge to win up to $100,000 to help solve for housing devaluation.
Since then, numerous news stories have surfaced that show the intrinsic value of whiteness expressed in biased appraisals. In 2020, the New York Times reported on the Jacksonville, Fla. couple, Abena (who is Black) and Alex (who is white) Horton, who had their home appraised. They believed that the appraisal was too low. So, they got a second appraisal. However, during this second round, the couple staged the appraisal appointment so that Alex was present instead of Abena, while the couple had purposefully removed all signs of Abena and their biracial son. The second appraisal yielded a 40% higher value than the first appraisal.
In 2020 in Indianapolis, amid the pandemic, Carlette Duffy sensed that appraisals on her home in the Black-majority Flanner House Homes neighborhood, west of downtown Indianapolis, had come in too low. After removing pictures, books and clothing—or scrubbing the Blackness from her home—and getting a white stand-in, her appraisal came in $134,000 higher. Numerous other stories have been published in places throughout the nation showing racial bias in appraisals.
While appraisals are certainly involved in lower home values, they are not the only actors influencing price. Lenders, real estate agent behavior, elected officials and public policies, biased labor markets as well other predatory housing practices also contribute to the problem of devaluation. Consequently, we need a suite of innovations based on people who are intimate with the issue.
The Ashoka-Brookings Challenge
We believe that no one understands the issue of housing devaluation better than the advocacy groups, firms and institutions who have been working to remove the everyday policies and practices that extract wealth and opportunity from residents, throttling their growth. We also believe that devaluation reflects discrimination throughout housing markets. Consequently, we are interested in innovations that address low appraisals, mortgage rates and insurance costs.
In addition, the country needs structural innovations that enable development without displacement; make it possible for people of all incomes to live and work in the same place; and push back against the increasing prevalence of financial landlords and the widespread use of eviction proceedings that accompany it.
If you have a structural innovation that fully values homes in Black communities and/or are connected to a community of innovators, please join the Ashoka-Brookings collaborative challenge to solve for housing devaluation. Participate in the opportunity to win funding of up to $100,000 to help drive change forward.
Participants can submit applications from now until January 13th on the Valuing Homes in Black Communities competition website. We are looking for applications from innovators who are advancing policy-based and market-based change on the local, regional and/or national scale. Participants will have a chance to win funding of up to $100,000. Participants who submit their application by December 2nd may also qualify for additional funding of up to $15,000 along with guaranteed advancement to the semifinalist round.
Past and present exclusionary policies and practices like redlining, racial housing covenants, single family zoning ordinances, and neighborhood level price-comparison approaches to valuation impact today’s home values. Correcting housing markets will require initiatives that encourage inclusion rather than exclusion and seek restoration of the value extracted by racism. The Ashoka-Brookings Collaborative Innovation Challenge on devaluation does just that.

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Labour markets and inflation in the wake of the pandemic

Labour markets and inflation in the wake of the pandemic | Speevr

by Frederic Boissay, Emanuel Kohlscheen, Richhild Moessner and Daniel ReesThe pandemic had a significant effect on labour markets. Working hours fell sharply almost everywhere, but the drivers of these declines varied greatly across countries, depending on whether policies to protect worker-firm relationships were in place. Labour markets have bounced back faster than after recent recessions, albeit unevenly. Even in countries where unemployment rates remain high, job vacancies have risen, including in the sectors hardest hit by the pandemic. Frictions are most pronounced where policy responses did not protect worker-firm relationships. Wages are generally rising more slowly than before the pandemic. However, there is significant dispersion across sectors. Wages are rising fastest in sectors such as information & communications where the pandemic boosted demand, and also in high-contact sectors such as recreation where labour supply has receded. A generalised pickup in wage growth still seems unlikely, even though some countries and sectors have seen increases. However, a retreat in globalisation could make inflation more responsive to labour market pressures.

Where is the Fed Vice Chair for Supervision?

Where is the Fed Vice Chair for Supervision? | Speevr

Randal Quarles, the first Trump appointment to the Federal Reserve’s Board of Governors, finished his four-year term as the Vice Chair for Supervision on October 13, 2021. To replace him, President Biden has nominated no one. The Fed replaced him with no one. For now, the Fed’s vital supervisory and regulatory priorities will be managed by the Fed’s Board of Governors, through their committee structure.

There is much to lament with this state of affairs. Quarles was the first to hold the position: it was created in 2010 in the Dodd-Frank Act to encourage the Fed to focus more completely on the vital work of bank regulation and supervision, areas that many feared had become neglected during the Greenspan years. Even though the position was created under a signature law of the Obama administration, that administration did not prioritize the formal appointment, relying instead on Fed Governor Tarullo to manage the portfolio, just as former Fed Governors had done. Today, for reasons known only to the administration itself, if known at all, the Biden administration has been plagued by delays in filling Fed and other financial regulatory vacancies. Even though the Vice Chair’s term is fixed by statute at four years, we still have no insight into the people the administration is even considering to succeed Quarles, as the administration has not even announced an intent to nominate anyone to any position at the Fed.
Quarles, a Republican, pursued a bank regulatory and supervisory agenda with expertise and a clear vision. He is no favorite of some Democrats, who do not endorse his vision, have little use for his expertise, and have been eager to see him depart the scene. Whether the Democrats would prefer it otherwise or not, Quarles is not going anywhere for now. He remains a Fed Governor, with the same important responsibilities over regulatory, supervisory, and monetary policy as his colleagues on the Board. That term is fixed for fourteen years and will not expire until 2032.
Here is the good news. Despite the mishandling of these vacancies from the Biden administration, the Fed’s decision not to reassign these priorities to another Governor is exactly the right thing to do. Its other alternatives are not attractive. It could have given now-Governor Quarles the responsibilities despite the expired term, but his ability to operate without the benefit of his statutory status would be significantly curtailed. The other option is hardly better: the Fed could have given these responsibilities to a candidate more in line with Democratic priorities—Fed Governor Lael Brainard, an expert on virtually every regulatory and supervisory question before the Fed, would fit this bill nicely. But Governor Brainard herself is a candidate to succeed Fed Chair Jay Powell, whose term as Chairman expires in January, and any move to reassign her portfolio could look like meddling in the Fed Chair sweepstakes that is still ongoing.
And so, the Vice Chair for Supervision—that unique creature of governance created by Congress just a decade ago—remains vacant, creating the possibility that financial regulation and supervision will not take their place at the forefront of the Fed’s policymaking. What’s more, the replacement of the Vice Chair position with a committee will devolve more authority to the Fed’s staff to handle this highly political and politicized portfolio.
So why is this good news? Because public oversight of the Federal Reserve System is primarily a product of public governance. We need, as a public, to have rigorous debates about who we want our central bankers to be. One such debate is underway as the Biden administration continues to consider the president’s appointment of the Fed Chair. Those who support Jay Powell, the incumbent, praise his leadership during the 2020 pandemic crisis and his management of a major shift in monetary policy regime. His detractors argue that his regulatory priorities are insufficiently aligned with those of the president, especially around bank regulation, financial stability, and climate change. While the tone of this debate can veer toward hyperbole—an American political tradition as old as the Republic—this is what politics looks like. We should welcome it.

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What we are not having, however, is that same level of debate around the priorities that the Fed should pursue as a regulator and supervisor. For this debate, we need to have time to consider viable candidates for this position. And we need the Fed not to do this work for us by pretending that the work of bank regulation and supervision has no political content in it.
The position obviously does have political content. The act of regulating and supervising the financial system is almost top to bottom a political exercise. We have elections to let that content and those exercises dictate the course that regulation and supervision should take. Just because the Biden administration has inexplicably dodged its responsibility for sponsoring that debate does not mean that the Fed should skip the debate entirely. By failing to appoint a successor to Quarles, the Fed has turned up the heat on the politicians to give us—the people and institutions affected most by the Fed’s regulatory and supervisory work—the chance to perform our role in vetting the nominees for this job.
Let’s hope the president accepts the Fed’s invitation as quickly as possible.

The Brookings Institution is financed through the support of a diverse array of foundations, corporations, governments, individuals, as well as an endowment.  A list of donors can be found in our annual reports published online here. The findings, interpretations, and conclusions in this report are solely those of its author(s) and are not influenced by any donation.