
Headlines about which cities have the most or least affordable housing markets often oversimplify the issue; the reality is that cities have a range of residential types with a range of social and economic implications for the people who live there. In Philadelphia, there are expensive historic districts, clusters of new luxury construction, walkable rowhouse neighborhoods, and areas that are indistinguishable from the nearby suburbs in look and price. But there are also many neighborhoods that struggle with a legacy of disinvestment related to industrial decline, suburbanization, and redlining. These neighborhoods are home to many low-income households, and their residents are often predominately Black and Latinx.
Because investors are more easily able to buy homes than local residents, long-term Black and Latinx residents are disadvantaged.
Today, many Philadelphia neighborhoods that have long struggled with the absence of capital are seeing substantial investment. The changes now occurring appear distinct from a typical gentrification story—the residents are the same, or at least demographically similar—but they still raise questions about the impact on the community. While capital investment is essential for neighborhood wellbeing and stability, it does not affect all residents equally, and it can have negative consequences for some. Understanding the nature of the capital that is moving into neighborhoods—to whom it is flowing and with what effect—is therefore critical.
To better understand these processes, Reinvestment Fund, the Philadelphia-based community development financial institution (CDFI) where two of us work, looked at mortgage lending activity across Philadelphia’s census tracts, with a focus on what the Home Mortgage Disclosure Act (HMDA) dataset calls “majority minority” census tracts (that is, tracts where more than 50 percent of residents do not identify as White). In these places, we observe much higher rates of home purchases by investors and higher loan origination rates for investment properties than for owner occupants.
Because investors are more easily able to buy homes than local residents, long-term Black and Latinx residents are disadvantaged and are less likely to be able to get loans, buy homes, and build wealth. Addressing this requires intervention both by policymakers and nonprofit organizations.
Understanding Philadelphia’s Distressed Housing Markets
Reinvestment Fund’s Market Value Analysis tool creates a typology of housing markets based on statistical analysis of key metrics such as price, vacancy, tenure, and investment. Our analysis identified nine distinct housing market categories in Philadelphia, with median sale prices ranging from $45,000 to $770,000.
Updated every few years, this analysis has documented change in the city for more than two decades. Neighborhoods with the lowest prices generally have other signs of distress, like vacant buildings, city code violations, and little-to-no new construction. In the past, home values were so depressed in some neighborhoods that the cost of repairs might be many times that of a potential sale price, making it difficult to break the cycle of disinvestment.
In our 2023 study, our researchers found that the four lowest-cost market categories had median sale prices ranging from $45,000 to $154,000—compared to a city median of about $250,000—and above-average poverty rates ranging from 23 to 49 percent in a city with the unfortunate distinction of being the “poorest big city.” A majority of residents in these lowest-cost markets are typically Black and/or Latinx.
At the same time, unlike many US cities, these neighborhoods have homeownership rates that, in some cases, only slightly trail the citywide average. As housing costs continue to climb, these neighborhoods are the only ones left in the city where homes remain affordable to families earning the city’s median income. Philadelphia has long prided itself on homeownership for moderate-income families—including Black and Latinx families; these neighborhoods are critical to maintaining that legacy.
Investors and Changing Market Values
Real estate investors look for neighborhoods where they can make a profit. This point seems obvious but is worth stating explicitly. Neil Smith articulated a “rent gap theory” in 1979 that drew a direct line from private market withdrawal from an area to its return.
Investors are drawn to areas where the current rents (or sale prices) are well below potential rents (or sale prices) because the difference—the rent gap—represents a substantial profit opportunity. Smith wrote about this phenomenon as a driver of gentrification. This same dynamic is evident in some market processes today that may not look exactly like the common conception of gentrification.
Prices in Philadelphia’s four lowest cost housing market categories doubled, and in some cases tripled, between 2018 and 2023.
Like many post-industrial cities, Philadelphia’s downtown (“Center City”) underwent major disinvestment in the second half of the 20th century with the departure of department stores and white-collar employers. The city reversed that trajectory in the 1990s, partly through a tax abatement program that encouraged the conversion of commercial space to residences and by investing in arts and culture.
As the potential market value of Center City increased, private investors arrived to revive vacant or underused properties. Then, in the 2000s and 2010s, as amenities increased and developable properties became harder to find, real estate investors turned their attention to adjacent neighborhoods. Many of these nearby areas had experienced major disinvestment and population loss, too, so prices were depressed.
Philadelphia needed investment in its aging housing stock, and vacancy was still a spiraling strain on resources and morale. As neighborhoods bordering Center City experienced major investment, they also saw demographic shifts consistent with gentrification, with fewer low-income residents over time. Some neighborhoods also saw significant declines in their Black and Latinx populations. Demographic change was most dramatic in places where homeownership rates were low.
In recent years, new construction activity has been generally concentrated in a handful of “hot” neighborhoods adjacent to the highest-value markets, but investor purchasing activity has been most heavily concentrated in the lowest-cost neighborhoods. This investment follows the foreclosure crisis, which also had an outsized impact on many of these neighborhoods.
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According to our analysis, prices in Philadelphia’s four lowest-cost housing market categories doubled, and in some cases tripled, between 2018 and 2023, far exceeding the pace of change citywide. These neighborhoods still have above average poverty rates and remain majority Black and/or Latinx. Yet housing prices have appreciated, and many residents are paying more for housing than they used to. Meanwhile, people who rent and want to purchase face higher costs if they wish to become homeowners.
Effects on Black and Latinx Prospective Homebuyers
Despite Philadelphia’s legacy of affordable homeownership—60 percent of households owned their own homes before the foreclosure crisis of the Great Recession—the city never returned to its pre-recession homeownership rate. The decline was greatest for Black households.
Continued income disparities mean that Black and Latinx prospective homebuyers in Philadelphia are often limited to home searches in the lowest-cost markets—precisely the same places where investors are most active. Homebuyers usually face more challenges than investors when purchasing a home. Investors are more likely to purchase properties before they go on the market so that a prospective homebuyer cannot even compete. They may have sufficient capital to buy with cash, making their bids for homes more competitive. When they do need financing, investors are denied mortgages at lower rates than individuals.
Our analysis finds that investors more often seek and obtain mortgages in census tracts where over half of residents are people of color. Figure 1 shows that investors comprise 22 percent of residential mortgage purchase applicants in so-called majority minority tracts compared to 13 percent in areas where the majority of residents identify as White. The difference is greater for loan originations (see Figure 2) because investors are more likely to have their mortgages approved; investors account for 26 percent of home purchase loans in tracts where the majority are people of color, compared to 14 percent in areas where the majority are White. These differences contribute to ongoing racial homeownership gaps.

Investors have lower denial rates than individual homebuyers everywhere, but the denial gap is largest in areas where residents of color form a majority. Figure 3 shows that mortgages for primary residences are denied at a higher rate (24 percent) than mortgages for investment properties (17 percent) citywide. The gap in denial rates is even greater in neighborhoods where the majority of residents are people of color, where 30 percent of loans to buy a primary residence are denied, compared to 18 percent of loans for investor purchasers.

The net impact: Residents of Philadelphia’s majority Black and Latinx neighborhoods are highly disadvantaged in securing home mortgage financing compared to investor buyers.
Enabling Black and Latinx Residents to Become Homeowners
While individual homebuyers cannot compete for houses that never go on the open market, many strategies can help Black, Latinx, and low-income homebuyers become homeowners. A variety of factors drive mortgage denials—including debt-to-income and loan-to-value ratios, as well as credit scores. Given that Black college graduates typically have substantially more student loan debt than White graduates, alternative underwriting practices that treat student loan debt differently than, for example, credit card debt reduce denial rates.
Another strategy is to help prospective homebuyers pay down debt using loan consolidation and/or forgiveness programs. And down payment assistance programs can help in a different way by lowering the loan-to-value ratio below 90 percent, at which point borrowers have a significantly better chance of securing a mortgage application approval.
Fair housing advocacy remains critical, too. Our recent research shows that even when Black and White applicants have similar financial qualifications, Black prospective buyers face higher denial rates, highlighting why aggressive enforcement of antidiscrimination laws is so important. Local and state policies can also be implemented, prioritizing individual buyers in auctions for publicly owned properties and sheriff sales.
The most crucial asset that nonprofits can bring to the table is trust.
What Nonprofits and Advocates Can Do
Nonprofit organizations and advocacy allies also have a role to play in ensuring that potential Black and Latinx homebuyers are able to buy homes in their neighborhoods.
Advocates can work with policymakers to design and fund homebuyer programs; they can also work to promote resources and relief programs for homeowners in lower-priced markets to help them remain in their homes. Fair housing advocates and organizations also play a critical role in advancing equal access to homeownership opportunities for classes protected by the federal Fair Housing Act.
Nonprofits can raise funds to acquire homes for the express purpose of reselling them to community residents—and may work with local governments to obtain properties at sheriff’s sale or from landbanks for this purpose. CDFIs can help finance these efforts. Many nonprofits also operate successful credit repair and homebuyer preparation programs, which can improve mortgage access.
The most crucial asset that nonprofits can bring to the table is trust. In communities with concentrations of both low-income home seekers and investor buyers, nonprofits with deep community ties are vitally important. Whether that role is connecting residents to homebuyer programs, fair housing advocacy, building ties with city officials, or building policy vehicles to facilitate land acquisition, nonprofits—armed with neighborhood market data and centered on community needs—can play a critical role in reducing the racial homeownership gap, in Philadelphia and beyond.