Redlining Maps Were Burned—But the Fundamentals Are Still Taught

For decades, many banks denied people mortgages because they lived in “redlined” neighborhoods. This prevented people (even creditworthy borrowers) from purchasing a home or getting a loan to renovate their house, and, more often than not, racial and ethnic minorities lived in neighborhoods marked risky for investment. Beginning in the 1930s, appraisers and lenders would communicate neighborhood value through a map and notes (as seen below). With red ink, they would signify neighborhoods least desirable for approving a loan. 

A screenshot pulled from the Richmond.edu website.

Neighborhoods were classified by four colors: grade A, green, for "Best”; grade B, blue, for "Still Desirable"; grade C, yellow, for "Definitely Declining"; and grade D, red, for "Hazardous."

This practice of redlining became illegal in the 1960s when The Fair Housing Act made explicit racial discrimination in housing transactions a criminal offense. Since then, property appraisers and lenders do not refer to maps with redlines circling minority neighborhoods to determine neighborhood values, or a person's ability to obtain a mortgage.

However, the International Association of Assessing Officers (IAAO), which teaches appraisers how to categorize a house’s value (which in turn represents an individual's ability to obtain a mortgage), still relies on a similar, if not the same, color code to inform both appraisers and assessors about home categorization and true value.

This is a slide from an IAAO course teaching the fundamentals of real property appraisal to both appraisers and assessors. It breaks down homes and neighborhoods into four color categories to represent what is called the “Neighborhood Lifecycle.” They are green, representing growth; blue, representing revitalization; yellow, representing stability; and red, representing decline—quite closely mimicking the practiced colors and categories of redlining maps.

Screenshot of the IAAO 101 Online: Fundamentals of Real Property Appraisal class.

To determine a home’s value, appraisers use this categorization method as one of the tools to communicate to lenders the potential risk of a mortgage. “Where it gets into the murky waters, is when the appraisers go out and appraise your house for sale and then they judge what your neighborhood is, and they're using those four colors,” said Joe Minicozzi, principal of Urban3, a data analytics firm that has been researching property tax inequities alongside the Just Accounting for Health project.

“If they've been trained to think of neighborhoods in those four color keys, then they're going to slot [homes] into one of those,” said Minicozzi. “Now, is there a bias? I think that's the slippery slope that you get into, especially if you just keep on reinforcing those same colors.”

Although redlining was made illegal in 1968, testimonials and lawsuits have pointed out that just because the practice of redlining was disbanded, it does not mean discrimination and bias were equally halted. Forbes reported in 2021, “Even with the passage of anti-redlining laws and several updates to the CRA, the financial system and housing market still struggles with its redlining past.” 

Homeowners Nathan Connolly and Shani Mott told The New York Times in 2022 that an appraisal company undervalued their home based on their race. After more than $35,000 dollars’ worth of renovations, the couple believed their home was worth much more than the sum of $450,000 they originally paid for it. The appraiser valued the home at $472,000, and loanDepot ended up denying the couple a refinance loan. Months after the first appraisal, the two applied for a second appraisal, but this time they removed any personal items within the home that would signify to the appraiser an African-American family lived there. They even had a white male colleague open the door for the appraiser. This time, the house was valued at $750,000. 

“I think where the nuance comes in is the appraisers will always say, ‘Well, you know, there's lots of variables, we're looking at current sales, etcetera,’” said Minicozzi on how the appraisal system relies partly on opinions and calculated guess work to determine a home value. “But they're never going to admit the fact that they were trained on that damn map.”

“I understand,” continued Minicozzi. “Maybe these are relevant inputs that you have to know if a neighborhood is declining or improving from an appraisal standpoint, but that means something. And shouldn't we be curious about the colors? Why is it these four? Why not six different colors?” 

With Urban3’s research into property tax inequities, Minicozzi also questions how these fundamental courses affect an assessor's work when determining home value (assessment), which affects the math used to produce an individual's property tax bill. There is a difference between the roles of an assessor and appraiser, but they find themselves attending the same IAAO courses to learn the fundamentals of calculating home values (which both roles do for different purposes, with different processes). 

In Urban3’s property tax inequities analysis, they’ve revealed the assessment gap: where the property tax burden has been shifted from owners of larger and more expensive properties to people who own smaller and less expensive homes. Minicozzi questions the math and the disparities discovered within the property tax system in his city of Asheville, North Carolina, but the same inequities can be seen throughout the nation, as well.

“[One thing] we found in the analysis is that they have these things called neighborhood codes,” said Minicozzi, who found his local neighborhood codes on the Buncombe County GIS Map under the “property card” category. “And the ‘neighborhood codes’ seem a lot like ‘judgment calls’ on the neighborhood. So, it's like, where did the [neighborhood code] map come from?”

In Minicozzi’s neighborhood of Montford, he says there are around 20 different “codes.” “And the neighborhood code doesn't match up with what you would think your neighborhood is,” he says. Homes within the same neighborhood, even homes right next to each other, can have different codes—which relate to the home’s value. The map below demonstrates the different levels of value, the yellow circle pointing out Minicozzi’s neighborhood of Montford.

The map above does not reflect scale, or necessarily a better property parcel, as one might think with the blue home values skyrocketing over the green. More often than not, these are similar-looking homes right next to each other; they’ve just been marked with a different neighborhood code and home value. As seen below, one home had a value increase of 316%, while the home adjacent to it had a value increase of just 102%.

“Why is the math different just one block or house away from each other? There's something in the neighborhood codes,” said Minicozzi.

When discovering these neighborhood codes, and the disparities of next-door home values, Minicozzi asked his local assessor about it, wondering where the codes came from and who made them. He said the assessor didn't have an answer, believing that they had just always been there. The codes, and the math to calculate values, are simply part of a taught system. 

“That math may have been created 100 years ago,” said Minicozzi.

Minicozzi asked about the neighborhood cycle map, and how that could possibly relate to assessments, since assessors are required to take and learn from that course. “When I talk to our local assessor, they don't see the connection [between being trained with redline colors versus neighborhood codes], because assessments are a different field now from the appraisals industry,” said Minicozzi. “So, it’s, ‘We don't do that. That's the mortgage industry.’ But they're trained in the same school. They’re trained with the same four-color-coded map.”

The property tax system and the appraisal process are generally considered to be filled with complexities, and can be confusing to those who don’t deeply study it. The Just Accounting for Health consortium is working to uncover property tax discrepancies, and bring to light issues that may otherwise be overlooked. 

“Moses didn't deliver our tax policies,” said Minicozzi. “We can change them.” 

To stay updated with the Just Accounting for Health project, sign up for email alerts here.

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