Redfin agrees to pay $4 million to settle housing discrimination lawsuit
A Redfin "for sale" sign stands in front of a house in Seattle. Credit: AP/Elaine Thompson
Real estate brokerage Redfin said Friday it agreed to settle a lawsuit alleging violations of the federal Fair Housing Act, including some on Long Island, by paying $4 million to housing groups that brought the case. It will also change policies the plaintiffs said discriminated against buyers and sellers of homes in communities of color.
Redfin, based in Seattle, said it will no longer set a minimum home price below which it doesn't offer its services to buyers and sellers.
The settlement is the latest effort by fair-housing groups, policymakers and the real estate industry to address bias that affects the buying and selling of homes — a major source of wealth creation. In March, the White House released a plan to counteract bias in home appraisals that has resulted in the undervaluing of homes in predominantly Black and Hispanic areas.
Newsday's Long Island Divided series in 2019 showed how minority homebuyers received disparate treatment compared with white buyers in 40% of cases analyzed as part of a three-year probe.
The lawsuit, filed in federal court in Seattle in October 2020, said Redfin was “perpetuating stark patterns of housing segregation” by offering less service to buyers in nonwhite communities. It was the result of a two-year investigation by the fair-housing groups, including Long Island Housing Services and the Fair Housing Justice Center in Long Island City, that showed Redfin was more likely to offer no service in nonwhite areas than in white areas.
On Long Island, the groups found that homes listed in predominantly white areas were 55 times as likely to receive offers of Redfin’s highest level of service than those in predominantly nonwhite areas. Redfin was 2.5 times as likely to offer no service in predominantly nonwhite areas than white areas, according to the lawsuit.
“We're now going into a different world, where businesses are using algorithms to automatically make business decisions,” said Ian Wilder, executive director of Long Island Housing Services in Bohemia. “If they do not bring in people who have awareness that the algorithms can discriminate, even if they're not discriminating purposefully … they can end up reinforcing already existing patterns of discrimination. As you know, Long Island is extremely segregated, and the model that Redfin +had was going to reinforce that and reinforce that across the country.”
Redfin also said it would work to increase the racial diversity of its agents and referral partners and create an advertising program to inform buyers and sellers in predominantly nonwhite areas of its services. The company specializes in using technology to offer real estate services to buyers and sellers and to buy homes directly from homeowners.
Lisa Rice, CEO of the National Fair Housing Alliance, said that one of the goals of the lawsuit was to "ensure that companies do not use their technologies, including digitally based platforms, to deny people the housing opportunities and services they deserve." She said in a statement that "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.”
Redfin did not admit liability as part of the settlement and the company said it would "rather spend money to advance fair housing rather than litigation."
Redfin agreed in the settlement it would fix its system for determining which potential clients are offered services, so “buyers seeking homes in predominantly nonwhite service regions have an equal opportunity to obtain service from a Redfin employee agent as buyers seeking homes of the same price in predominantly white service regions” in the same market at the same time.
The company said it loses money selling low-price homes and will continue to use prices to determine whether it can serve customers. But it won't decline to refer a person to a partner agent because the person inquired below a certain price and the fair housing groups will monitor the criteria it uses to set price thresholds.
Redfin has sought to compete with legacy brokerages by charging lower commissions. It charges a 1.5% listing fee to sellers and drops its commission to 1% if the seller also buys their next home through the company. The average commission for real estate agents in New York last year was 5.11%, according to real estate company Clever. Listing agents typically split their commissions with buyers' agent.
Redfin's low-commission business model doesn't permit it to discriminate against certain buyers, Wilder said.
“It ultimately can’t be that the only way that you can afford to be in business is a way that even implicitly ends up discriminating against people,” Wilder said. “That’s not acceptable.”
Redfin committed that at least 11% of the new homebuyer customers it serves each quarter will be those seeking to buy homes that are listed for less than Redfin’s target price threshold in certain counties, including on Long Island. It can either serve them through its own agents or referral partners.
On Long Island, those price thresholds will be $500,000 in Nassau County and $400,000 in Suffolk County, Wilder said.
The housing groups said they would use the $4 million to monitor Redfin’s compliance with the settlement and to support programs that increase homeownership opportunities on Long Island and in the other localities named in the lawsuit.
Wilder said Long Island Housing Services will receive about $205,000, including $80,000 designated for homeowner assistance. While that's a small sum compared to local housing prices, "in concert with other funding we get, it helps move it forward," he said.
Other plaintiffs in the lawsuit were the South Suburban Housing Center in Homewood, Illinois; HOPE Fair Housing Center in Wheaton, Illinois; the Fair Housing Center of Metropolitan Detroit; the Lexington Fair Housing Council in Kentucky; the Metropolitan Milwaukee Fair Housing Council; the Fair Housing Rights Center in Southeastern Pennsylvania; and Open Communities in Evanston, Illinois.
Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.
