Steering in Real Estate: What Prospective Homebuyers Ought to Be aware
Steering in real estate is the illegal practice of discriminating against renters and buyers based on a legally protected characteristic. Steering can occur consciously or even unconsciously when real estate agents make assumptions about what a customer wants or needs based on the customer’s personal characteristics, including race, gender, and sexual orientation. An example of steering would be an agent not showing homes to Black homebuyers in a predominantly white neighborhood, while guiding white homebuyers toward that same neighborhood. This practice promotes homogeneous neighborhoods and intentionally discriminates against people of color and other underrepresented communities.
Steering is illegal under the Fair Housing Act but still occurs throughout the country, although in more subtle ways. Learn how to identify steering, understand its history, and ask the right questions to ensure that steering doesn’t happen to you.
What is steering in real estate?
Steering is the illegal practice of “steering” prospective homebuyers away or to certain areas based on their race, national origin, familial status, religion, gender, sexual orientation, or other legally protected characteristics. Generally, real estate steering negatively impacts immigrants, people of color, and LGBTQ+ folks, while benefiting white, cisgendered homebuyers. Historically, guiding Black people away from white neighborhoods has been the most prevalent form of steering.
While this practice was once widespread, it has been illegal since the adoption of the Fair Housing Act in 1968 (as part of the Civil Rights Act). Since the 1970s, steering has largely receded from public view but is still practiced nonetheless.
History of steering
Before the civil rights movement in the 1950s, real estate steering was widely accepted. This, combined with rapid urban development and the systemic economic inequalities that Black people continue to face, has led to dramatic negative effects on regional American demographics.
Real estate agents once openly shut Black homebuyers out of white communities. Nowadays, some agents instead apply other tactics to steer buyers to certain communities based on race, ethnicity, sexual orientation, or other protected characteristics. An agent may ask one homebuyer to reconsider a neighborhood based on “safety” or “criminal activity,” while saying nothing to another homebuyer who is a person of color. They may also say that they only want to show the “best” houses to some buyers and not others.
Steering has become a subtle and sometimes unintentional form of discrimination, where agents place certain homebuyers into more integrated neighborhoods at a higher rate than other homebuyers. The practice has affected the demographic makeup of cities across the country and is perpetuated to this day.
Differences between steering, redlining, and blockbusting
These real estate practices are illegal, discriminatory, and are not tolerated under the Fair Housing Act. Unfortunately, discrimination in real estate services remains pervasive. Historic and continuing discriminatory practices continue to influence the demographics of many areas around the country.
A form of redlining, steering involves a real estate agent influencing a homebuyer’s choice of communities based on the buyer’s race, religion, gender, sexual orientation, or other protected characteristic. A real estate agent may not tell a buyer about available properties that meet their criteria within certain neighborhoods because of their assumptions about what a customer wants or needs based on the customer’s personal characteristics. Steering can be subconscious and influenced by internal biases. As such, the practice is often subtle. Steering leads to monocultural, single-race neighborhoods that generally favor white, cisgendered homebuyers.
Blockbusting is when real estate agents manipulate homeowners into selling their property at a lower price based on a false fear that the socioeconomic makeup of the area is changing. The agents falsely convince homeowners that new groups of buyers moving in will negatively affect the sale value of homes in the area. In practice, this tactic generally favors white homeowners and negatively affects people of color.
Let’s look at an example: an agent hires a person of color to walk dogs through a neighborhood. Immediately after, the agent asks homebuyers in that neighborhood if they want to sell their home due to an increase in homebuyers of color. The agent asks for a lower price based solely on the false assumption that people of color will decrease the market value in the neighborhood.
Redlining generally refers to the denial of services such as mortgages, insurance loans, and other financial services to residents of certain areas, based on their race or ethnicity. It originated from government-created “residential safety maps” that rated neighborhoods based on a number of factors, including race. These maps were created as part of the 1930s New Deal, where Congress offered government-insured mortgages to homeowners to ward off Depression-era foreclosures. The red-colored areas of the maps were seen as risky mortgage investments and were given the lowest “D” rating. These redlined areas were home to mostly people of color and other minority groups, who would therefore receive a bad mortgage rate or none at all.
How are real estate agents trained?
Before somebody becomes a real estate agent, they have to take licensing and training courses. Usually, the steps are fairly simple – research a state’s requirements, take a pre-licensing course, take the licensing exam, and activate a license. From there, before joining a brokerage, a prospective agent can choose to join the National Association of Realtors (NAR). Not every agent joins NAR and it’s not required that they do, but most join in order to become a REALTOR®.
REALTORS® agree to a strict code of ethics that bars any form of illegal discrimination. The Code of Ethics, along with fair housing laws, determines how real estate agents conduct their business. Generally, fair housing laws bar agents from providing demographic data about a neighborhood. The laws also require agents to provide equal guidance to customers about areas in which they may want to live.
What are the consequences of steering?
Steering in real estate is a violation of the Fair Housing Act and is punishable by law, through a private lawsuit, an administrative complaint filed with the U.S. Department of Housing and Urban Development (HUD) or a state/local fair housing agency, or actions brought by the Department of Justice. Penalties include high civil monetary fines, in addition to exposure to claims for actual damages (economic or emotional distress), punitive damages, and attorney fees. Many state licensing laws also prohibit discrimination, and an agent found to be in violation may have their license revoked or be banned from NAR.
How should real estate agents treat homebuyers and sellers?
In order to reduce the possibility of steering, agents should always:
- Provide customers with objective information that lets the customer drive their home search. Agents shouldn’t immediate prospective homebuyers with comparative hunts to various areas in view of their discernment or suspicion of what areas may be a superior “fit.”
- Provide customers with listings based on their objective search criteria, such as property features or price point. Customers with the same criteria should be shown the same listings.
- Provide the same guidance and information to all customers. Don’t assume a person’s financial qualifications based on their name, race, national origin, gender, religion, or other protected characteristics.
- Avoid coded language when talking about neighborhoods or properties. Discussions about schools and safety can be used to hide racial or other differences. Rather than opinions on school quality or neighborhood safety, agents should direct customers to objective, third-party resources.
What to do if steering is happening to you
The following are some steps you might take if you’re a homebuyer who thinks you’re experiencing steering:
- The first thing you should do is talk to your agent or brokerage. Be upfront with and ask them why they’re only showing you houses in certain neighborhoods. If this feels unsafe, ask a friend to help or find another agent.
- Keep track of your agent’s name, agency, license number, emails, etc.
Talk to an expert:
- Steering is wrong and illegal, even if it’s unintentional. Contact HUD, your local fair housing office, or a real estate lawyer to help you consider your options.
The content of this article is intended to convey general information only and not to provide legal advice or opinions. Please contact an attorney for advice on specific legal issues.