Association for Public Policy Analysis & Management

While recent studies have examined whether renting, minority, lower-income, or lower-credit score households in gentrifying neighborhoods have higher mobility rates, empirical evidence on the consequences of gentrification on homeowners is rare. Gentrification could displace homeowners if rising house prices raise property assessments, making property taxes unfordable for long-term lower-income homeowners and forcing them to move, thereby accelerating the pace of gentrification. One major identification challenge, however, is that gentrification is an ongoing, evolving process that often occurs simultaneous with the improvement in home values and property taxes, making it difficult to isolate the impact of gentrification on homeowners’ tax payment behavior and displacement.

We contribute to the literature by taking advantage of an exogenous policy shock in the city of Philadelphia. Since the 1980s there had been no comprehensive reassessment of the market value for properties in Philadelphia until 2013, which kept assessed values for most properties largely unchanged and substantially lower than their actual market value. By adopting a sweeping overhaul of its property taxation system (the Actual Value Initiative) in 2013, the city reassessed the market values of all properties and changed the way individual assessments are used to calculate tax bills. Using a property-level dataset from the city government, this study tries to examine the consequences of gentrification on homeowners by comparing the property tax amounts and homeowners’ tax payment behavior before and after the policy change using a difference-in-differences framework. Findings from this study will help researchers, policy makers, and practitioners understand the mechanisms through which gentrification may impact more vulnerable homeowners. The gentrification measure used in this study uses the same methodology as in Ding, Hwang, and Divringi (2016) but is based on the 2010 census definition.