The Gentrification Conversation – It’s a Steering Temptation
Home purchases in “turning around” neighborhoods can be good investments as new owners see their property values rise faster than other nearby neighborhoods. But gentrification changes a community’s characteristics and can flirt with Fair Housing Act violations.
WASHINGTON – Redevelopment can breathe life into a struggling neighborhood, but be careful to avoid steering clients.
Adjacent to downtown Detroit is the historic Rivertown neighborhood, which sits along the Detroit River. Once home to major industrial plants and manufacturing businesses, the area’s shops and restaurants supported thousands of workers well into the 1970s. But when the auto industry started restructuring and sending operations overseas, Rivertown began losing its tax base. Soon after, other businesses relocated or shut down. With Detroit’s total population falling from roughly 1.9 million in 1950 to 772,419 in 2010, according to the U.S. Census Bureau, Motor City was already struggling when the Great Recession and foreclosure crisis hit in 2008.
By then, Rivertown was a dilapidated ghost town lined with vacant lots and abandoned homes. Still, even during the worst years, the neighborhood’s value lay hiding in plain sight. Its proximity to the river and the city’s business district made it ripe for rebirth when the time was right. Since filing for bankruptcy in 2013, Detroit has been on the path toward revival. Companies like Quicken Loans have brought jobs back, and the opening of Little Caesars Arena downtown has spurred development in the surrounding community.
As a result, Rivertown has become the fastest-gentrifying neighborhood in the U.S., according to realtor.com. However, the wave of redevelopment that gentrification brings can have a domino effect, attracting more commerce and propelling economic growth, but one that exposes a disreputable side that isn’t unique to Detroit. This process often displaces low-income residents, disproportionately affecting African Americans, many of whom can’t afford high-end new construction.
Playing out in cities large and small around the country, this scenario is a main contributor to the worsening racial wealth divide. And the topic of a neighborhood’s changing character may well arise when you’re working with clients interested in buying a home in these evolving neighborhoods.
How you talk about gentrification matters
You can expect clients and neighbors to spark conversations with you about how gentrification is changing the characteristics of their community. What they may notice most are the new – and different – faces moving in next door. How you engage in such conversations is important, as there could be legal ramifications to what you say.
The Fair Housing Act and the Realtors® Code of Ethics prohibit real estate professionals from discussing topics such as the racial composition of a neighborhood, quality of schools, safety of neighborhoods, and other subjects that could be construed as steering buyers to or from a certain community. Using subtle, coded language meant to imply the demographics of a neighborhood is also illegal.
An investigation by Newsday published in November found disparate treatment and evidence of fair housing violations when undercover testers posing as homebuyers visited real estate agents throughout Long Island, N.Y. A total of 93 agents were tested over three years, and the probe found unequal treatment occurred 49% of the time with Black testers, 39% with Hispanic testers, and 19% with Asian testers. Unequal treatment included showing minority testers fewer properties, steering testers toward certain neighborhoods, and refusing to serve minority testers who weren’t preapproved for financing – but not requiring the same for white testers. Agents also used euphemisms to communicate the racial makeup of an area and imply racial bias.
National Association of Realtors® (NAR) President Vince Malta says he was “deeply troubled” by Newsday’s findings. “Housing discrimination violates NAR’s Code of Ethics, as well as federal, state, and local laws, and NAR maintains its strong support of fair housing testing to unmask housing discrimination and hold our industry to the highest standard,” he says.
The Long Island Board of Realtors echoed Malta’s sentiments in a statement: “We take the issues raised in the Newsday piece extremely seriously. The Long Island Board of Realtors understands that Realtors play a key role in making the American dream possible for Long Islanders. That means treating all people fairly and equally.”
When discussing gentrification while working with customers, avoid focusing on how specific groups of people are either moving into or out of an area, and don’t imply preference of one area over another based on demographics.
“The topics generally have a discriminatory impact on the listener and may directly communicate bias,” says Fred Underwood, director of engagement, diversity, and inclusion at NAR. Agents should also offer up an equal number of properties to buyers of all ethnicities in all neighborhoods that meet their search requirements.
However, while it’s wise not to discuss the shifting demographics of residents, you can offer information on how changes in neighborhood characteristics affect home values. It’s important that the tone of the conversation expresses “support for integration and is in the fair housing spirit,” Underwood says.
Still, try to be aware that biased comments, by you or others, can occur unintentionally. Understanding the role that people’s “unconscious biases” may have is an important step in limiting their influence.
Topics to keep off the table
Kamal Cheeks, CIPS, broker-associate at MBC Real Estate Company in Detroit, uses property-related data on local residential sales, property taxes, and listings to give clients insight into a neighborhood, but he never discusses racial demographics.
“When talking to [local and out-of-state] investors and single-family homebuyers or people listing homes for sale, I pretty much use data to give them a snapshot of what’s going on,” he says. Cheeks prefers the Realtors Property Resource, a property database where he can pull sales statistics, changes in value, distressed properties, and flood zones. “I give clients data from several areas, and I let the buyer tell me what area they’re interested in,” Cheeks says. Then he can drill down block by block to find properties that match his clients’ needs.
“Real estate professionals can certainly talk about the changes happening in an area without talking racial composition,” says Lesley Muchow, NAR’s deputy general counsel and vice president of legal affairs and member experience. “Don’t engage in a conversation about the racial, religious, or ethnic makeup of individuals in a neighborhood. All of that could be seen as a fair housing violation.”
You can talk about how gentrification has affected property values, which doesn’t signal any protected classes, says Underwood. However, he adds, “if you’re steering to or from a community, that can be problematic.”
Tommy Wolf, a sales associate at HomeSmart Optima Realty in San Francisco’s Bay Area, says gentrification and affordability have been hot topics in his market. Several high-profile tech companies in the area are expected to announce initial public offerings or stock market launches soon, which will attract more expensive talent. “This has only inflated concerns surrounding gentrification, since the new tech employees are expected to have a lot more buying power than current Bay Area residents,” he says.
While speaking with clients about race is never appropriate, you should equally avoid code words or implied meaning. Blanket terms such as “ethnic” or “urban” can evoke certain stereotypes. “A good way to avoid any issues on this front is to restrict your verbiage to market conditions,” Wolf says.
Taking action to help the affected
What else can you do to support housing equity when gentrification contributes to housing opportunity imbalances and biases?
Cheeks, for example, sits on the Detroit Brownfield Redevelopment Authority’s Community Advisory Committee, which gives input and recommendations on revitalization projects in distressed and blighted areas that receive tax increment financing dollars. Cheeks says it’s his duty as a Realtor to ensure all people have access to quality housing, and that’s what he strives for as a committee member.
“With any developments that come forward, I want to know how many affordable units they have available and how those units will be treated,” Cheeks says. “They should not all be bottom-floor units with no view. I like to hear about developments that treat all of the potential residents of those properties equally and not use obscure units to stick in people who have low income.”
Another smart practice real estate professionals can adopt is to pay attention to relevant news and developments in their local communities, attend meetings, pursue volunteer roles on committees, and support candidates for local office to “influence the addition of equitable redevelopments and affordable housing,” says Wolf.
Underwood says agents and their brokerages should be consistent in how they market themselves in all communities and provide the same services and information to assist people with their real estate needs. This would include helping potential sellers understand the benefits of home improvements and offer examples of legitimate resources for making improvements. Real estate pros can also help current residents analyze whether retaining their property as an investment would be a better option than selling, allowing them to generate wealth through rental income.
But if a longtime resident is intent on selling, you have an important role in making sure a transaction is fair. “Focusing on making sure the seller gets full value for their sale would help avoid predatory actions that strip communities of their wealth,” Underwood says.
Checking your own bias
You may hold the opinion that all neighborhood investment – and the resulting changes it produces – are good. Marguerite Martin, who has been a sales associate since 2005 at Windermere Professional Partners in Tacoma, Wash., says she was naive early in her career about the ways people were hurt.
“I don’t think I had a full understanding of the impact,” she says. It wasn’t until she started her website, MoveToTacoma.com, in 2015 and began participating in community discussions that she saw people unable to afford to buy or rent in neighborhoods where they had traditionally lived. “Most of us are not getting gentrification questions from our clients,” Martin says. “Gentrification usually means there’s a lot of investment coming in, it’s getting more expensive, and poor people are moving out.”
Many people, especially renters, who are being displaced by gentrification don’t have information that could help them stay in their homes or aren’t aware of other options, such as financing, buyer programs and grants, and closing cost assistance, Wolf says. At that point, they need your help more than ever. “Working with a Realtor can help them overcome obstacles, and it’s our responsibility to make the communities we serve aware of this fact.” He acknowledges that widespread conversion of rental properties to higher-end condo developments is adding to inventory pressures and pushing out longtime tenants.
Martin started a podcast that takes a deep dive into community issues in Tacoma, as well as an adult civics happy hour covering topics such as how local government works and why rents are so high. She advocates for more safety net programs and longer turnover timelines for tenants who are being displaced by redevelopment projects.
“When a neighborhood is being gentrified, step one is to educate yourself,” Martin says. “What is the history of the neighborhood? Who are the people who live there? Who are the players? Talk to them, go to meetings, and you’ll be seen as a person who wants to understand and participate in the most positive way possible.”
Cheeks speaks to block clubs, gets involved with local nonprofits that help with home buying, and explains the process – how people need to prepare for a transaction, tips for saving, and assistance programs offered by banks.
“All real estate professionals should do this,” he says. “It will help them get sales, but that’s not the main focus. It’s about how they can be of service to the community.”
© National Association of Realtors®. Erica Christoffer is a multimedia journalist and contributing editor with REALTOR® Magazine.