A new suit argues the online brokerage disproportionally serves white neighborhoods. CEO Glenn Kelman countered that Redfin hasn’t pushed into lower income areas because it needs to pay agents a living wage.

A new lawsuit accuses online brokerage Redfin of racial discrimination and favoritism toward predominantly white neighborhoods, though the company counters its practices merely boil down to paying agent wages.

The allegations were raised in a lawsuit that the National Fair Housing Alliance (NFHA) and other advocacy organizations filed against Redfin Wednesday. The suit accuses Redfin of only offering agents and other services to homes priced above a certain threshold. The threshold varies by location, but according to the lawsuit the ultimate result is that “buyers and sellers of homes in non-white areas are far less likely to be offered Redfin’s services and discounts than buyers and sellers of homes in white areas.”

“Redfin’s policies and practices operate as a discriminatory stranglehold on communities of color, often the very communities that have been battered by over a century of residential segregation, systemic racism, and disinvestment,” the suit also argues. “By disproportionately withholding its services to homebuyers and sellers in these communities, Redfin disincentivizes homebuying within these communities, reduces housing demand and values, and perpetuates residential segregation.”

In a statement Thursday, the NFHA explained that in preparation for the lawsuit it conducted a two-year investigation into Redfin’s pricing practices. The investigation looked at markets in Maryland, Illinois, Michigan and other states and ultimately found that white homes in white neighborhoods tended to be eligible for Redfin services at disproportionately higher rates than those in non-white areas.

For example, the investigation found that in Baltimore in November 2018, only 6.84 percent of homes in “extremely non-white” ZIP codes were offered Redfin’s “best available service,” a term the suit uses to refer to the comprehensive suite of Redfin offerings that include agents, discounts, refunds and other perks. On the other hand, in extremely white neighborhoods 50.79 percent of the homes were eligible for the company’s best services.

Results were similarly lopsided in Chicago, Detroit and other cities.

The lawsuit also accuses Redfin of inconsistent pricing policies that appear to favor white neighborhoods. For example, the investigation found that in the racially diverse city of Chicago this June, Redfin’s brokerage services were only available on homes costing at least $400,000.

However, in nearby DuPage County — which is predominantly white — Redfin’s brokerage services and discounts were available for “buyers and sellers of homes that met a minimum price threshold of only $275,000.”

Redfin engaged in similar practices in Detroit, the suit alleges. There, Redfin reportedly set a minimum price threshold of $700,000. But outside of the city limits where racial diversity was lower, the threshold was only $250,000.

Glenn Kelman | Credit: Redfin

The allegations in the lawsuit are especially jarring because in recent years Redfin, and especially CEO Glenn Kelman, have been among the most vocal critics of housing discrimination in the real estate industry. Back in 2018 for example, Kelman lamented the existence of segregation and noted that “none of us is free of sin.”

Then last year, after an investigation found widespread discrimination in the real estate industry on Long Island, New York, Kelman was among the most vocal industry leaders to condemn the problem.

“Set a zero-tolerance policy for discrimination,” he urged in a Twitter thread.

Kelman was also a vocal proponent of a ban on pocket listings last year in large part because, he argued, such privately shared listings can perpetuate discrimination. And earlier this year, Redfin was among a group of companies that began advocating for more diversity on corporate boards of directors.

Thursday, Kelman responded to the new lawsuit in a blog post on Redfin’s website. In the post, Kelman said that his company complies with federal fair housing laws and is not in violation of regulations.

More significantly, Kelman also argued that Redfin picks and chooses which areas to serve because it needs to pay its agents (which, atypically for the industry, are employees, not independent contractors) a living wage.

“The challenge is that we don’t know how to sell the lowest-priced homes while paying our agents and other staff a living wage, with health insurance and other benefits,” Kelman said. “This is why Redfin agents aren’t always in low-priced neighborhoods. It’s why Redfin doesn’t serve many rural towns.”

Kelman went on to mention that most businesses have to choose between paying living wages and delivering good prices to customers, and that Redfin has historically “strived to do both.” Kelman also said that Redfin has a history of expanding into lower price tiers and that while “the suit is wrong about the law, the issues it raises are important to Redfin, to our society and to me.”

“In an imperfect world full of choices we don’t always like, my ironclad commitment to you, beyond complying with the law in letter and spirit, is to do what we believe is right,” Kelman also wrote.

No court dates have yet been set in the case, but the suit ultimately asks that Redfin be required to change its business practices, and for unspecified monetary damages.

Email Jim Dalrymple II

Glenn Kelman | Redfin
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