After nearly two years, Redfin has reached a settlement with National Fair Housing Alliance and nine other fair housing organizations for its flagship service price thresholds that discriminated against low-income and minority homebuyers and homesellers.
Redfin will eliminate minimum home price requirements, increase the racial diversity of its workforce, increase advertising minority communities and require agents and local partner realty firms to attend fair housing training.
The brokerage will also pay $4 million, which will be used “to conduct monitoring and compliance programs that expand homeownership opportunities in the cities covered by the lawsuit and cover litigation and investigation expenses,” NFHA explained.
“Our goal was to ensure that all neighborhoods are treated fairly and have access to the full range of services provided by any real estate company,” NFHA CEO Lisa Rice said on Friday. “We must also ensure that companies do not use their technologies, including digitally-based platforms, to deny people the housing opportunities and services they deserve.”
She added, “The steps Redfin has agreed to take are a positive move toward stamping out some of the nation’s most harmful practices, like redlining and appraisal bias.”
The NFHA’s battle with Redfin began in October 2020, when the Alliance claimed two years of research revealed the Seattle-based brokerage’s minimum housing price policy resulted in homesellers living in predominantly minority communities disproportionately being denied service.
The NFHA examined Redfin’s pricing policy in Baltimore, Chicago, Detroit, Kansas City, Long Island, Louisville, Memphis, Milwaukee, Newark and Philadelphia from June 2018 to June 2020, and found that homes in white neighborhoods tended to be eligible for Redfin’s flagship services at higher rates than homes in non-white neighborhoods, and often had lower minimum price thresholds.
For example, a Chicago homeseller who wanted to list with Redfin in June 2020 had to have a minimum property value of $400,000. Meanwhile in nearby and predominately white DuPage County, homesellers’ threshold was only $275,000.
NFHA said the disparity in minimum price thresholds and access to Redfin’s full services, which includes professional photos, virtual tours, online promotion or commission rebates, led to homes in minority neighborhoods languishing on the market and ultimately being sold for less.
“Redfin’s policies and practices operate as a discriminatory stranglehold on communities of color, often the very communities that have been battered by a century of residential segregation, systemic racism, and disinvestment,” the lawsuit said.
Redfin CEO Glenn Kelman immediately rebuffed NFHA’s accusations, saying the minimum housing price policy was simply a matter of making sure the brokerage could pay its agents a living wage, which he said the Fair Housing Act allows brokerages to do.
“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 in an October 2020 blog post while maintaining the brokerage hadn’t broken the law. “This is why Redfin agents aren’t always in low-priced neighborhoods. It’s why Redfin doesn’t serve many rural towns.”
“We’ve built a network of over 5,000 partners in an effort to serve customers for every home on our site, but our own agents still can’t make a decent living selling the lowest-priced homes,” he added.
However, the NFHA and other fair housing organizations said Redfin’s policy was “fundamentally problematic” and the increasing reliance on algorithms and artificial intelligence to guide brokerage policies can lead to unintended “discriminatory effects.”
“Certainly, as the marketplace becomes increasingly digital and online, and companies are able to offer their services in new ways that target the marketplace in different ways, that targeting can have a discriminatory effect,” NFHA General Counsel Morgan Williams told Inman in November 2020. “The same biases that have long infected the market also structure the kind of data that may be utilized. Those same biases may impact these models and produce discriminatory outcomes.”
Although Redfin is waving the white flag on this case, the brokerage told ABC News on Friday the settlement isn’t an admission of guilt. However, after two years, they’d rather spend their money on improving housing access than litigation.
Those improvements, per the settlement, will include the creation of a Redfin Price Threshold monitoring system for listings that are assigned to Redfin employee agents and an approval process for creating and revising service regions.
They have also agreed to craft recruiting programs with the National Association of Real Estate Brokers, the National Association of Hispanic Real Estate Professionals and the Asian Real Estate Association, which will all be overseen by NFHA.
“Our commitment to broadening the price range of the homes we can sell is why, every year, by design, we lose money selling low-priced homes,” a company spokesperson told ABC News. “As part of the settlement, we will increase our investment in serving buyers interested in low-priced homes in communities that have historically been underserved by the real estate industry … Redfin hasn’t broken the law and we continue to stand behind our business practices.”
In an emailed statement to Inman post-publication, Redfin doubled down on their statement to ABC News and said the settlement is about moving forward “in a positive way” and the policy changes outlined in the settlement “reinforce and strengthen our existing efforts to advance fair housing.”
A brokerage spokesperson also said Redfin “stands virtually alone” in paying agents a living wage through a salary and health benefits, and they’re continually working to “strike a balance” between their business economics and serving the greater good.
“The central issue in the lawsuit, at least from our perspective, settled in our favor: Redfin can keep considering home prices when deciding whether to serve a customer with a partner agent or an employee,” the statement read. “But as we’ve reminded employees many times over the years, anyone selling homes has a special responsibility not just to earn a living, but also to contribute to a just society.”
“Redfin has always tried to strike a balance between employee income, corporate income and our commitment to a just society,” it continued. “It’s natural for others, who don’t focus on how much money we lose on a home or overall, to ask us to do more for a just society.”
“For a decade already, we’ve invested in employee service for people buying or selling homes at prices that were unprofitable to Redfin; now we’ll invest more.”
Read the full settlement terms below: