Race, School Ratings And Real Estate: A 'Legal Gray Area'

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With her infant son in a sling, Monique Black strolls through a weekend open house in the gentrified Shaw neighborhood of Washington, D.C. There are lots of factors to consider when looking for a home — in this one, Monique notices, the tiny window in the second bedroom doesn't let in enough light. But for parents like Black and her husband, Jonny, there's a more important question: How good are the nearby schools?

It's well known in the real estate industry that highly rated schools translate into higher housing values. Several studies confirm this and even put a dollar figure on it: an average premium of $50 a square foot, in a 2013 national study.

In Chappaqua, N.Y., an affluent bedroom community for New York City, the town supervisor recently went so far as to declare that, "The schools are our biggest industry — whether you have kids in the school or not, that's what maintains our property values."

But some advocates for fair housing see a potential problem with the close ties between school ratings and real estate. They say the common denominator, too often, is race. And they argue that the problem has intensified in the last decade with new web platforms bringing all kinds of information directly to homebuyers.

"A school rating map mirrors a racial dot map," showing patterns of segregation and diversity, observes Sally Santangelo, the executive director of Central New York Fair Housing, a group that provides education and legal assistance to oppose housing discrimination.

That, in turn, raises some complicated questions about how factors like test scores and school ratings are used to influence homebuying decisions.

Characteristics like safety and parent involvement — the qualities Monique and Jonny say they value in a school— can be hard to quantify. Most states base their school ratings primarily on more easily measured factors, like standardized test scores and graduation rates. And these indicators, in turn, are heavily influenced by inequities of race and class.

There's a large, persistent and well-documented gap in test scores between black and Hispanic students and their white and Asian peers. There are many reasons for these disparities: income and wealth gaps, disciplinary policies that "push out" black students from school systems, less experienced teachers, the early-learning gap between high- and low-income children. But they all end up reflected in one number: a school rating.

"A lot of time, with schools that serve majorities of students of color, you get a negative rating because the test scores are low," says Genevieve Siegel-Hawley, an assistant professor who studies race and housing at Virginia Commonwealth University. But, she says, "most of the variation in test scores is explained by the kids' own poverty or the poverty of their school."

Housing patterns and school ratings, of course, also reinforce each other. In most places around the country, school budgets are partly linked to local property taxes. Highly rated schools beget higher housing values, which in turn beget more richly resourced schools.

It's a virtuous cycle for a town like Chappaqua, but a vicious cycle elsewhere.

What does all this mean for potential homeowners like Monique Black? Or for realtors who see school quality as a selling point?

For a realtor, directly discussing the racial composition of a neighborhood with homebuyers is against the law. In 1968, the Fair Housing Act outlawed the practice of racial "steering" by realtors. This can mean showing different properties to a white family and a black family who have the same requirements, or telling them different things about the desirability of a given property or neighborhood, in a way that tends to maintain segregation or perpetuate discrimination.

The National Fair Housing Alliance, an advocacy group, conducts "mystery shopper" sales tests, sending out people of various backgrounds to pose as house hunters and determine whether they hear different messages.

It is evident from the investigation that schools have become a proxy for the racial or ethnic composition of neighborhoods."

In a 2006 report, the NFHA documented some form of steering in 87 percent of these encounters. And, says Morgan Williams, the organization's general counsel, this steering included discussions of school quality.

"A striking pattern regarding schools emerged from these sales tests," the report states. "Instead of making blatant comments about the racial composition of neighborhoods, many real estate agents told whites to avoid certain areas because of the schools. It is evident from the investigation that schools have become a proxy for the racial or ethnic composition of neighborhoods."

For example, white testers reported that they were told to avoid the Tarrytown, N.Y., schools, which are predominately Hispanic. In several cases, the report says, agents there told whites that the schools were "bad," but Latinos were told that the same schools were "good."

In Philadelphia, an agent told a white tester that the schools in a particular town were very good, then added, "But don't tell anyone I told you that."

Williams says comments about schools have been included as part of the evidence in at least one case that resulted in a finding of discrimination.

He points out that the National Association of Realtors advises its members not to air their opinions about schools, and to instead direct clients to objective sources of information.

House Hunting Online

Current fair housing laws govern advertising and statements made by landlords and real estate agents. But in the last decade, the web has brought the process of house hunting closer to consumers. And this brings a new dimension to the connection between racial housing patterns and school ratings.

Realty search engines like Zillow, Homes.com and Redfin link to local school ratings prominently on every listing. The actual racial and ethnic composition of each school is a click or two away. On all three sites these ratings are color-coded: green, yellow or red.

Siegel-Hawley of VCU started using Zillow when she and her husband were looking for a "dream house" in Richmond, Va. She quickly took note of the color-coded school ratings and said they reminded her of redlining, which was a legalized and explicit practice of discrimination supported by the Federal Housing Administration between 1934 and 1968.

The FHA published maps with poor communities of color shaded red, showing where they would refuse to insure mortgages.

The question Siegel-Hawley raises is: Might school ratings on real estate sites constitute a 21st century form of racial steering?

Redfin did not respond to a request for comment in time for publication.

Test scores are "a standard metric," says Nicole Hofmeister, a product manager at Homes.com. "To my knowledge, it doesn't factor in anything about race or socioeconomic factors."

Michael P. Seng, a professor of fair housing law at John Marshall Law School in Chicago, isn't so sure. Providing school ratings oversteps the bounds of what a real estate service should be doing, he says.

But to bring an actual court case, he explains, a plaintiff would need to prove that the school ratings steer people out of communities on the basis of race. "It would take a lot of statistical studies, but I think it's possible," he says.

Morgan Williams calls the issue a "legal gray area."

Current fair housing laws focus liability on the people who are selling housing: the landlords and the real estate agents. But online platforms put information directly in the hands of consumers, so their liability is less clear.

For example, in response to questions about school ratings, Katie Curnutte, vice president of communications at Zillow, offered this statement: "These data points serve as a starting point to do further research and connect with a real estate professional."

Sally Santangelo, of Central New York Fair Housing, agrees. "If you're just providing someone with neutral information," she says. "I think it would be hard to argue that the intent is discriminatory."

She adds that a homebuyer could easily access the same information about schools through other public sources, like local government websites. Plus, Santangelo says, "someone might want to move into a diverse community," and thus be using the school information for nondiscriminatory purposes.

But the use of color coding, and the ready availability of information about demographics, she says, could still be a cause for concern. "If a realtor was to hand somebody Census stats showing the race and ethnicity of the neighborhood, it would probably be an FHA violation."

The question that has yet to be settled, says Williams, is: "Does providing this information to consumers, in a format that would allow for discrimination, constitute discrimination?"

No, says Fred Underwood, director of diversity at the National Association of Realtors. "I'm not certain that any of this rises to the level where it would be a court case." On the other hand, he acknowledges, "If you're consistently undervaluing certain communities and overvaluing others, and there's a racial correlation, then there might be a problem."