In a scathing report, the National Fair Housing Alliance last week claimed that racially-motivated steering and unequal treatment of African-American and Latino home seekers are commonplace practices by some realty agents.

The nonprofit fair housing group says it conducted "paired sales tests" in 12 metropolitan areas between early 2003 and mid-2005. The tests involved whites, Latinos and African-Americans posing as prospective home buyers in repeat visits to realty brokerage firms to detect any patterns of differential treatment by agents. The "tests were structured to capture detailed information about agent and (realty) company policies and practices," said in the report.

In each paired investigation, there was a team of testers, one white and one either African-American or Latino. "Two teams of testers contacted the same real estate sales office. In all cases, the teams were assigned similar information about housing needs, financial qualifications and employment history. In every instance, the African-American or Latino teams were slightly more qualified than the white teams" in terms of income, downpayment availability, outstanding debt loads and length of employment tenure.

The Department of Housing and Urban Development (HUD) provided $649,000 to help fund the study, and the fair housing group provided another $500,000. A total of 145 paired tests were completed for the study in 73 sales offices in metropolitan New York, Washington DC, Chicago, Atlanta, Austin, Birmingham, Philadelphia, Pittsburgh, San Antonio, Dayton and Detroit.

According to the report, "almost 20 percent of the time, African American and Latino testers were refused appointments or offered very limited service" in comparison with white testers. Whites were shown more homes -- a total of 1,144 or 8 homes per test, while minority testers wee shown 732 homes in total, an average of 5 homes per test.

Sometimes steering and discriminatory behavior were "blatant," according to the report. "In every metropolitan area tested, some agents told testers that they knew it was illegal for them to steer or make comments based on race or national origin, but the agents in question then went on deliberately to steer or make illegal comments."

In one specific case cited in the study, an unidentified agent in Marietta, Ga. allegedly told a white tester that "she (the home buyer) would not want to live in" Stone Mountain, Ga., a predominantly African American community. She was only shown homes in predominantly white areas, according to the study. By contrast, an agent from the same firm actively recommended Stone Mountain to African American testers and "drove the testers around the area pointing out 'for sale' signs."

The report claims that white testers repeatedly were shown greater numbers of homes -- mainly in white areas -- while minority testers were shown fewer properties. The study also claims that:

• Minority home seekers were more likely than whites to be required to bring preapproval letters from lenders before agents would show them homes.

• Minority testers more frequently were told "to do (their) own additional searches for homes." For example, "a Chicago agent told a Latino tester that he was only available to meet with him for one day. After showing the tester a few homes, the agent suggested that the tester look in the paper for additional homes. In contrast, the white tester was shown 16 homes over two days, and the agent made several comments to the tester about various communities."

• White testers were offered far more financial incentives such as closing cost reductions or lower mortgage fees compared with minority buyers. The incentives were offered in connection with mortgage or settlement services affiliates of the realty firms.

• Steering frequently made "use of schools as a proxy" for the racial or ethnic composition of neighborhoods. "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 clear," said the report, "that some agents in the real estate industry are creating and perpetuating the demand for certain schools and school districts" based on racial or ethnic factors.

Asked for comment on the report, National Association of Realtors spokesman Steve Cook told Realty Times Friday that "we continue to be concerned about fair housing in America. We (at NAR) have our own training programs that we are using to train brokers and agents" on fair housing issues.

Cook said NAR did not have enough information about the specific paired testing methodology and sampling sizes to "say what the significance of the findings are" in terms of agent behavior nationwide.

"But we agree that there is work to be done in fair housing," he added.

HUD had no immediate comment on the study.

Published: April 10, 2006

Use of this article without permission is a violation of federal copyright laws.

Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.