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Housing prices increase as a neighborhood gentrifies, and that can often leave original residents at risk of being priced out of their rental homes. But what’s the effect on homeowners?

CityLab writer Tanvi Misra reports on a new study from the Federal Reserve Bank of Philadelphia in which authors Lei Ding and Jackelyn Hwang examine the effect of gentrification on the property tax burdens of low-income homeowners.

As housing prices rise, so could the tax burdens of these residents. The authors were curious about whether that resulted in a higher rate of tax delinquencies. If so, were vulnerable homeowners being forced to sell their homes or face foreclosure? And did protections for some populations that Philadelphia instituted with the tax increases make a difference? Philadelphia is a unique case in which to study these questions. In 2013, the city made a sweeping overhaul of its property tax systemafter criticism that the previous system was based on assessments that were lower than many homes’ market value. The new taxes, through the Actual Value Initiative (AVI), went into effect in 2014 and were derived from what the property assessment office considered to be the actual market value of the properties. That meant that many homeowners who had been seeing only their housing values rise as their neighborhood gentrified, also saw a sharp rise in property taxes in 2014.

Their top line finding: the more intense the gentrification, the higher the likelihood of delinquency. Generally, gentrifying neighborhoods in Philadelphia saw a 4.2 percentage point increase in their tax delinquency rate after the property tax overhaul. The ones undergoing the most intense gentrification saw up to a 5.4 percent point increase. Still, the researchers did not see elderly or low-income homeowners selling off their homes and leaving as a result. In fact, the elderly in gentrifying neighborhoods were actually less likely to move, per the study.

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