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The housing scarcity makes discrimination on the idea of housing a lot simpler

On Tuesday, Glenn Kelman, CEO of real estate agency Redfin, tweeted a bizarre anecdote: "A Bethesda, Maryland homebuyer who works with Redfin promised in their written offer to name their firstborn child after the seller."

The story is so strange – why would anyone want a stranger to name their child after them? Maybe it's a joke – but it shows one way housing shortages can stimulate desperate buyers to open the door to housing discrimination.

And there is hardly any living space in the US right now, as Kelman's thread pointed out. Freddie Mac expected a shortage of 3.8 million residential units at the end of 2020. The Federal Reserve Bank of St. Louis (FRED) found that housing supply had plummeted over the past year. the Urban Institute found similarly low numbers; and Redfin's own data show the number of homes for sale has fallen nearly 50 percent since last year. All of that said – there are very, very few homes for sale relative to the number of people who want to buy.

1 out of 15: It was difficult to convey through anecdotes or data just how bizarre the US housing market has become. For example, a Bethesda, Maryland homebuyer who works with @Redfin offers in her written offer to name her firstborn child after the seller. She lost.

– Glenn Kelman (@glennkelman) May 25, 2021

In a healthy, non-discriminatory housing market, buyers will compete for houses by raising their bids. The American real estate markets are neither healthy nor non-discriminatory, and with supply at all-time lows, sellers have increasing power to legally and illegally discriminate against buyers.

A property could receive multiple offers well above the price, meaning that (although this is obviously the most relevant) Amount of money isn't the only metric sellers use to select an offer. In addition to bidding high prices, buyers are turning to a variety of creative methods to differentiate themselves from their competitors – cash offers, waiving inspections and other critical contingent liabilities, and writing personal cover letters.

It is this final strategy that will set flags for anyone familiar with fair housing law. Personal cover letters encourage the buyer to sell themselves and their family as a product for the seller to consider.

Hobart, a lawyer who lives in the suburbs of Pittsburgh, told Vox that this happened when he and his wife were looking for a home last summer: “I stressed that we would be good neighbors and commit ourselves to the community. .. try to stand out from others by saying that we are nice, normal people. "

Hobart, whose last name is being withheld to protect his privacy, felt weird about the experience and remarked to me that as a lawyer he neither had a hard time writing a convincing letter nor did any research (before he ever was) Seen the house!) who the owners were and how to address them. But not everyone has this background.

"If that wasn't your forte," he said to me, "is that really what it takes (to buy a house)?"

Redfin data from 2018 shows that this type of cover letter could be very effective: With "thousands of offers" Redfin agents submitted between 2016 and 2018, they report that writing a personal cover letter increases the odds for you Bid war up 52 percent (The company actually stopped pursuing this, fearing it might encourage their use, raising concerns about fair housing).

The Fair Housing Act protects Americans from discrimination based on race, color, national origin, religion, gender, marital status, and disability. Personal cover letters require people to show that they are "nice, normal people" – families you would love to live with if your neighbors moved.

This opens the door to people's subjective actions of what this means. If you are more likely to feel a connection with someone who looks like you and has a similar background, it could lead to people being discriminated against based on one of the classes the Fair Housing Act is supposed to protect.

It's also incredibly difficult to spot this type of discrimination.

A Compass real estate agent told the Wall Street Journal that their clients won a bidding war after the buyers "wrote a letter describing their two-year hunt for a home in the Noe Valley neighborhood and the architecture of the home and its adjoining buildings Playground had praised ". The listing agent confirmed to the journal that "my customers were won over by emotions".

In other cases, the potential for racial discrimination becomes even more likely as buyers include photos with their cover letters that are posted with their children or pets. Marketplace reported one such pair, which won against several other offers, even though it wasn't the highest. The couple's agent mentioned that the sellers "loved the fact that we were locals". In a country where residential discrimination is widespread, being a local can often correlate with a particular race or ethnicity.

This is a known problem. Just last year, the National Association of Realtors warned that "buyer love letters" could open brokers and customers to legal liability:

Think about where a potential buyer writes to the seller that he can imagine his children running down the stairs for years to get into the house on Christmas morning. This statement reveals not only the marital status of the potential buyer, but also his religion, both of which are protected characteristics in terms of fair housing rights. Using protected features as a basis for accepting or rejecting an offer, as opposed to price and terms, would violate the Fair Housing Act.

There is no data to show that this type of letter has increased in the last year, as the number of buyers continues to be significantly higher than that of sellers. However, we should expect discrimination to occur more frequently. In a healthy housing market where buyers could be sure they would find multiple potential homes in the area they wanted to live in, it would be a seller asking to write an ode to a home they have not yet seen have a strange nuisance to ignore.

But sellers can ask for pretty much anything in the American real estate markets right now.

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