Zillow equates MRED’s private listings to ‘digital redlining’ 

A Zillow analysis of MLS data in the greater Chicago area suggests that private listing networks can amplify racial disparities in access to housing.  

What Zillow found: A review of listings on Midwest Real Estate Data (MRED) — a Chicagoland MLS that offers its own private listing network (PLN) — found that homes listed in the PLN were "2.2 times more likely to be in majority-white neighborhoods," according to a news release. 

The findings were based on an analysis of active listings from Oct. 21. After controlling for price and other differentiating factors, Zillow researchers determined that nearly 8% of homes for sale in majority-white areas were listed in MRED's private network, while just 3.4% of homes in neighborhoods with a non-white majority were on the PLN.

Why it matters: Zillow cited a study by Elizabeth Korver-Glenn, a sociology professor at the University of North Carolina, which concluded that the use of private listings can inadvertently reinforce racial segregation. 

That's because "real estate agents tap their social networks as primary tools for generating business," Korver-Glenn found. "Because white agents' networks are overwhelmingly comprised of other whites, this means that Asian, Black and Latino consumers are disproportionately excluded from finding out about informally listed homes for sale handled by white agents," she wrote.

A case of 'digital redlining'? "Chicago shows what can happen when parts of the housing market move into the shadows," Zillow Senior Economist Orphe Divounguy said in the release. "The data show clear disparities, and good intentions are no longer an excuse for expanding digital redlining," Divounguy added.

What MRED had to say: In an unsigned Nov. 21 letter sent to its 50,000 members, the MLS said it "takes Fair Housing very seriously, with rules and processes in place to scan all private and active listings for violations."

In addition, the letter stated, "we also believe that any bad actors deserve all consequences, professionally and legally, that come to them."

Citing a "highly confidential" Zillow strategy document that it said was made public as part of the portal's legal battle with Compass, MRED said Zillow's "criticism of MRED's PLN does not seem to be about protecting consumers or advancing fair housing. It appears to be part of a broader strategy to secure complete control of listing distribution and undermine the cooperative foundation of MRED."

MRED's defense of PLNs: The new Zillow research appears to offer a counterpoint to a letter sent last week by MRED CEO Rebecca Jensen. Jensen defended MRED's private listing network — which has been in place for years — arguing that "the PLN allows us to respond with compassion and options, not threats and strict fines to the listing broker trying to help families navigate their home sale during a difficult time."

While not referencing Zillow directly, the letter comes a few months after the portal began enforcing its new listing standards — rules that bar listings that have been publicly promoted but not made widely available through IDX from appearing on its site. Notably, Zillow has not started enforcing the standards in MRED's coverage area "due to the unique situation" of the MLS offering its own private listing network, the company said earlier this month.

The broader PLN debate: Zillow's findings align with its vocal and longstanding opposition to private listings, which the company says hurt consumers and run counter to the idea of an open, transparent housing marketplace.

Some major brokerages disagree, with Compass leading the fight to expand the use of private listings. The firm is currently embroiled in a lawsuit against Zillow over the portal's private listing ban.

Editor's note: This story was updated on Nov. 22 to include a response from MRED.