Steering in Real Estate: Examples and Explanation

The real estate industry in the US has a complicated history of racial profiling and segregation. Although all discriminatory practices are banned by the law, there are still some agents that use insidious ways of inserting their own bias into buyers’ decisions. The most common discriminatory practice used by real estate agents today is steering.

Steering in real estate happens when a realtor suggests a specific neighborhood or area above another. This is usually done without the buyer’s knowledge. In fact, it is illegal under federal law. But, it’s still a common practice among some realtors. And it presents an unfair advantage to some buyers over others - mostly white vs. minorities of color.

There are ways to fight back - you can prevent, avoid, and report steering. But first, you need to understand what it means, how it manifests, and how it came to be. Additionally, you might want to know more about similar discriminatory real estate practices and the laws that prohibit them.

What Is Steering in Real Estate

Before we start explaining steering, note that steering is illegal under federal law and it violates the National Association of Realtors Code of Ethics. Steering is when a real estate agent directs clients to neighborhoods based on their color or ethnicity.

Let’s give an example. A real estate agent has two clients. They are both looking for a similar property, both have above-average credit scores, and are looking for a family home in the same price range. A good and reliable real estate agent would look into the listings and offer them similar properties, so they can make a selection based on their own needs and preferences.

However, some agents will include their own bias into the selection process and offer different listings to the two buyers, without them even knowing. They will “steer” white homebuyers toward predominantly white neighborhoods, telling them that those are the areas with “the best schools” and “lower crime rate”.

On the other hand, they will offer much fewer listings to the black buyer, which will be in neighborhoods with mixed demographics or even predominantly populated by people of color. So, how does this affect the communities?

How Does Steering Affect the Communities?

The Federal Trade Commission defines steering as "the act of encouraging consumers to purchase a specific home or neighborhood." Agents often do this by telling potential buyers about houses that are similar to theirs but different enough to make the difference seem negligible.

Steering in the real estate industry limits the options available for black or Latino buyers. In practice, agents steer white people away from and minorities toward diverse neighborhoods and, accidentally or intentionally, perpetuate the idea of segregation.

Real estate agents don't always realize they've given biased information. Sometimes they are convinced that they are serving the needs of the buyer. While most agents don't intend to steer, they still play a role in creating segregated communities. When an agent selects listings for the prospective buyer, they should count in only the preferences that the buyer mentioned. This type of discrimination occurs because agents assume that homebuyers prefer living near others like themselves in terms of race. That has its consequences. 

What Is Steering in Mortgage Lending?

Homeownership rates are lower for black people than for white people. This is largely due to a lack of access to mortgage lending. Lenders offer less favorable loan terms to some people based on their color or ethnicity. As a result, many marginalized Americans cannot afford to buy homes.

Housing Options are Lower for Minorities

By offering people of color only the properties located in the neighborhood populated by minorities, real estate agents are actually lowering the option pool for those homebuyers. Some studies show that an agent prone to steering will show 50% more listings to the white borrower, even though he has the same properties as the black borrower.

Homes in Discriminated Areas Have Low Appreciation

Steering in real estate means that agents are taking part in disabling the intergenerational collection of wealth and properties’ appreciation in value. Not to mention that real estate steering, together with mortgage steering, causes high foreclosure rates.

Lower home appreciation can lead to low homeownership rates. Black people have a historical issue of being discriminated against in the real estate industry, and until this day they are, on average, less likely to own a home than other minorities.

Discrimination in School Districts

Steering, as a racial segregation tool, limits opportunities for children of color. In addition, segregated schools harm communities and families. Steering is often done using the phrase “better school district”. Schools in areas with more minority residents are often poorly funded and neglected by the authorities.

Steering Is Illegal and Prohibited by the Federal Law

The Fair Housing Act

The Fair Housing Act was passed in 1968 and amended several times since then. It prohibits all forms of housing discrimination, including those based on race, color, religion, sex, disability, familial status, and national origin. The law applies to both public and private entities. The act covers rental properties, real estate sales, and homebuying.

All discriminatory real estate practices are prohibited by this act. The US Department of Housing and Urban Development is in charge of implementation, and you can report an agent to the HUD in case of discriminatory practices against you.

Local Laws Against Discrimination in Real Estate

In addition to protecting individuals from discriminatory practices, many local laws prohibit landlords from discriminating against prospective tenants based on factors such as marital status, sexual orientation, gender identity, source of income, family size, and citizenship. Some even require landlords to make reasonable accommodations for disabled individuals.

For example, the City of San Francisco requires landlords to offer "reasonable accommodation" to qualified applicants with disabilities. This includes providing auxiliary aids or services necessary to allow the applicant to access the rental unit. In some cases, it may mean modifying the physical structure of the property, such as ramps or special elevators.

How to Tell If You're Being Steered

Your realtor could try to steer you towards particular neighborhoods based on your race or ethnic background. They'll say things like: "this neighborhood has great schools," or "you'll love living here." These statements aren't necessarily racist, but they could still constitute steering.

There are ways to tell whether your realtor is trying to steer you based on your race or another othering factor. Here are some signs that might indicate that your realtor is steering:

• Your realtor talks about the preferences that you didn’t specifically list as important. They are trying to influence your selection process.

• Your realtor makes a statement that seems biased against a group of people or a specific area.

• Your realtor suggests specific neighborhoods or areas over others. He or she might suggest that you look in a specific part of town or that you avoid certain parts of town altogether.

Realtors must offer equal professional services to everyone, regardless of race, religion or ethnicity. They must offer the same price, terms, and conditions to every buyer. If you suspect steering, contact your local housing authority, the Better Business Bureau, or the attorney general’s office.

Other Illegal Real Estate Practices

The problem with steering in the real estate industry is that it limits the choices available to minority groups. Unfortunately, it is not the only discriminatory practice in real estate. It is, however, the most prevalent to this day.

Redlining is a discriminatory real estate practice that was established in the first half of the 20th century. Urban planners, lenders, and investors all drew red lines around the areas populated by black people and described those places as high-risk investment areas. Homebuilders and investors did not bring their business to those areas, and the consequences are lasting to this day.

Blockbusting and white flight were also racial segregation tools used by biased realtors. Blockbusting refers to the intimidation of white residents, who are told that black people are coming to their neighborhoods. 

White people, biased and scared, then, agree to sell their homes to realtors for close to nothing. Those realtors sell the place to black families for a very high price and earn money. White flight refers to the phenomenon provoked by the blockbusting of white people leaving the neighborhoods as soon as minorities move in.

Selling a Home in a Historically Discriminated Neighborhood?

Are you selling a home in an area that has historically been, accidentally or intentionally, “steered away from” by white homebuyers? You might feel like you can’t get top dollar for it. Don’t worry – SleeveUp Homes will buy your home, and we will buy it for ten grand above what others are offering.

We are real estate professionals who value ethics and community above all else. So, contact us and request an offer today. We will not disappoint.

Author:

Cesar Gomez , Broker /

Cesar has worked as a real estate agent and broker in the southern California region since 2013.

  view all blogs by this author