Housing Discrimination Is Not The Past, But The Present
We should end the 'buyer broker' rule in New York.
A recent Newsday investigation found widespread discriminatory practices in Long Island real estate sales, as reported by the NY Times editorial board:
Newsday sent white investigators posing as buyers to meet with 93 real estate agents about 5,763 listings across Long Island. Then, they sent a second buyer — either black, Hispanic or Asian — to meet with the same agents. The practice is a gold-standard methodology known as “paired testing,” in which real estate agents are contacted by pairs of prospective clients with similar financial profiles.
Black testers were treated differently than white ones 49 percent of the time. Hispanic buyers encountered unequal treatment 39 percent of the time and Asian buyers 19 percent of the time.
Along with steering minority testers to majority-minority areas, and white testers to mostly white areas, some agents required black buyers to meet additional financial conditions that they didn’t demand of white buyers with the same profile.
I really wasn’t surprised by this. I’m sure this is going on all across the region, all across the country, which is one of the reasons we’re a segregated nation. It’s not just individuals choosing to move to neighborhoods of people that look like them.
But I am mostly posting this to lend support to the remedy that the editorial board recommends, which is a dramatic rethinking of how the real estate business works:
Yet the persistence of discrimination suggests the need for still stronger correctives.
In Australia and the United Kingdom, home buyers rarely hire their own real estate agents. Instead, the agent selling a home handles the whole process. This is significantly cheaper for buyers and sellers, and it limits the opportunity for discrimination, since buyers decide which houses to visit on their own.
The key difference is that buyers in those countries pay agents directly, whereas in the United States, the trade associations that control real estate listings require sellers to agree to pay the buyer’s agent as a condition of listing a home.
Consumer advocates have long attacked this “buyer broker rule” as a key reason agents still are able to command such high fees. That is reason enough for New York to end the practice. But reducing the reliance of buyers on real estate agents — or at least shifting the relationship so the agent is paid by the buyer — could also make a meaningful difference in reducing the practices uncovered by Newsday.
I’m all for it.