The $57 billion cost of racial and ethnic inequity in Philadelphia’s housing market

Philadelphia homeowners in Black and Latino neighborhoods collectively would have $57 billion more in property wealth if their homes appreciated at the same rate as homes in majority-white neighborhoods, according to an analysis of seven decades of property value data published by the nonprofit Economy League of Greater Philadelphia.

Home ownership is how most families in the United States build wealth, especially wealth that is passed down through generations. And a large share of Philadelphians are homeowners.

But from 1950 to 2022, property values in neighborhoods where most residents were white grew a lot faster than property values in neighborhoods where most residents were not.

» READ MORE: Philadelphia is one of America’s most diverse cities — and one of the most divided.

“To say that race hasn’t had a massive impact on housing prices is just to ignore reality,” said Jeff Hornstein, executive director of the Economy League of Greater Philadelphia and coauthor of the report released this month.

If homes in majority-Black neighborhoods appreciated at the same rate as homes in majority-white ones, adjusting for inflation, homeowners in Black neighborhoods would have a total of $24 billion more in housing wealth, according to the analysis, which the Economy League said is the first of its kind in Philadelphia.

The valuation gap is even larger in majority-Latino neighborhoods. If homes in Latino communities appreciated at the same rate as properties in majority-white ones, homeowners in Latino neighborhoods would have a total of more than $33 billion in additional housing wealth, according to the report, which used home price data compiled by Kevin Gillen, economist at Drexel University.

Broken down individually, Black homeowners who bought in 1950 would have about $113,000 in additional home wealth and Latino homeowners would have roughly $157,000 more.

» READ MORE: Homes in Black neighborhoods are valued less than similar homes in white areas

Philadelphia’s home value gaps were “far higher” than Hornstein anticipated, he said.

“Some of these distribution maps, they’re just shocking,” he said. “That’s the thing to me is how shocking this all is.”

Philadelphia has “this incredible disparity in wealth appreciation,” and “we just live with it,” he said. But the city has “this opportunity to do right by our working-class homeowners” who haven’t seen the growth in housing wealth that others have, Hornstein said. And he said this report can be used to “inspire positive change.”

Here are some more takeaways from the Economy League’s analysis.

Structural racism has prevented the home value growth seen in majority-white neighborhoods from happening in Black and Latino neighborhoods. Barriers to price appreciation include segregation, disinvestment, the denial of mortgages to households that weren’t white, historical agreements among white homeowners not to sell to buyers who weren’t white, predatory mortgage lending, and bias in property appraisals.

» READ MORE: Black home buyers face barriers from past racist policies and current practices

The Economy League report found that from 1950 to 2000, the best way to predict home price growth in a neighborhood was to look at its home ownership rate in 1950. The higher the home ownership rate then, the more likely homes were to appreciate.

And in 1950, white residents were more likely to be homeowners than Black or Latino residents because of systemic racial discrimination. So majority-white neighborhoods had more homeowners.

» READ MORE: It’s no easier for Black Philadelphians to become homeowners now than it was 30 years ago (From 2021)

Home ownership gaps have narrowed since then, but home value gaps persist.

In the 2000s, the main driver of home price growth was a neighborhood’s proximity to Center City. But almost as big a driver was the combination of the white population and the home ownership rate of residents who weren’t white.

» READ MORE: How The Inquirer profited from ‘restricted’ neighborhoods that barred Black buyers

In addition to building generational wealth, homeowners can use the value of their properties to help their families advance economically, such as paying school tuition or start-up costs for a business. Less home value means less money available to leverage.

Devalued properties also mean less money for neighborhood services such as schools, libraries, and public safety, and amenities such as parks.

Maritza Pedlar, director of the Economy League’s Impact Labs social innovation incubator program, said what struck her about the report was “just how much is lost through that one asset over generations” in terms of wealth and opportunities. She noted how different the city would look if it had equitable home price growth, given the connection between lost wealth and social problems such as poverty and crime.

» READ MORE: Renovating abandoned houses reduces the rate of gun violence, Penn study finds

And devaluation of homes also means less money for the city. The Economy League estimated that if homes in majority-Black and majority-Latino neighborhoods had grown in value at the same rate as homes in majority-white neighborhoods, they would be generating more than $66 million per year in additional real estate tax revenue.

Pedlar said she hopes the report’s findings “will really encourage people to invest in these neighborhoods that haven’t had the same type of investment” as majority-white neighborhoods.

» READ MORE: Philly homeowners with rising property tax bills can apply for more relief

Home prices in neighborhoods that have stayed majority white have had “significantly above-average” growth since 1950 that exceeds the citywide price growth rate of 165%.

Neighborhoods that have stayed majority Black had the lowest price appreciation rates. Places that were majority Black in 1950 but were no longer Black in 2021 (according to the latest available Census Bureau data) due to gentrification and the displacement of longtime residents had relatively high rates of home price appreciation.

» READ MORE: Effects of gentrification on longtime residents are not as negative as typically perceived, Philly Fed says (From 2019)

Home values in the typical Philadelphia neighborhood that went from majority white to majority Black from 1950 to 2022 grew by 66% — compared to an average growth rate of 210% in neighborhoods that stayed majority white.

Home prices in historically white neighborhoods grew by 140% over the last seven decades, while prices in neighborhoods that are currently majority Latino grew by 19%.

Pedlar said possible solutions to help rectify home value inequities include policies to address what has hindered communities of color, such as biased appraisals and restrictive zoning laws.

“We would expect that the types of ideas that would be brought about from a report like this that would inspire innovators would touch on areas of policy, housing fair practices and best practices, and then also community initiatives that would likely be things that everyday Philadelphians can take action on,” she said.

Solutions could include investing in neighborhood parks and getting people to move into areas with shrinking populations, Hornstein said. He also pointed to programs such as Jumpstart Philly, a loan program that trains residents to be developers and tackle blight.

The Economy League anticipates that City Council will hold hearings about its report in the new year. And over the next couple of months, the organization plans for a researcher to do more in-depth, neighborhood-by-neighborhood analyses.

The organization also plans to ask Philadelphians to share ideas on how to revalue properties in neighborhoods that have been historically undervalued in what it is calling the “Fair City Challenge.” It will call for ideas, hold a pitch competition, and invest in one or two proposals that could be scaled.