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Is homeownership still an effective means of building wealth for low-income and minority households?
... One of the angles of this chapter is to compare wealth levels of homeowners and renters. This is not only because homeowners systematically possess more wealth and homes constitute about two thirds of households' wealth (Sierminska et al., 2006) but also because there has been a lot of discussion recently on whether being a homeowner may help you accumulate wealth (Herbert et al., 2013). ...
... The decision to purchase a home is not easy, and the literature on this suggests that there are arguments both for and against homeownership (for an overview, see Herbert et al. 2013). In the end, whether owning a home will lead to an accumulation of wealth will depend on a complex set of factors, related both to the choices that households make in buying their home and to how these choices interact with market conditions at the time of the purchase, as well as over time. ...
... For example, the way the mortgage market is developed may have an impact on the prevalence of homeownership. Countries that offer high loan-to-value (LTV) loans and interest deduction may encourage mortgage takeup, especially among low-income and younger households (Herbert et al., 2013). Countries that provide lower capital-gain taxes on financial products may encourage financial investments (Guiso et al., 2002). ...
... One of the angles of this chapter is to compare wealth levels of homeowners and renters. This is not only because homeowners systematically possess more wealth and homes constitute about two thirds of households' wealth (Sierminska et al., 2006) but also because there has been a lot of discussion recently on whether being a homeowner may help you accumulate wealth (Herbert et al., 2013). ...
... The decision to purchase a home is not easy, and the literature on this suggests that there are arguments both for and against homeownership (for an overview, see Herbert et al. 2013). In the end, whether owning a home will lead to an accumulation of wealth will depend on a complex set of factors, related both to the choices that households make in buying their home and to how these choices interact with market conditions at the time of the purchase, as well as over time. ...
... For example, the way the mortgage market is developed may have an impact on the prevalence of homeownership. Countries that offer high loan-to-value (LTV) loans and interest deduction may encourage mortgage takeup, especially among low-income and younger households (Herbert et al., 2013). Countries that provide lower capital-gain taxes on financial products may encourage financial investments (Guiso et al., 2002). ...
... Home ownership is widely valued as an indicator of social achievement (Rossi and Weber 1996) and an effective means of wealth accumulation (Di, Belsky, and Liu 2007;Herbert, McCue, and Sanchez-Moyano 2013;Killewald and Bryan 2016). In recent qualitative studies, young adults recognize home ownership as a necessary economic condition for marriage Miller 2011, 2017). ...
... In recent qualitative studies, young adults recognize home ownership as a necessary economic condition for marriage Miller 2011, 2017). To promote home ownership and home equity value appreciation, the availability and cost of home mortgages have become more consumer-friendly, especially since the late 1990s (Herbert et al. 2013). ...
... However, among the homeowners, home debt value is much higher in the NLSY97 cohorts than in the NLSY79 cohorts. This trend may be explained by the rising loan to value (LTV) since the 1990s because of the expansion of the home mortgage market(Herbert et al. 2013; Li and YangCHAPTER III Gender and Rural-Urban Divide: Family Wealth and First Marriage among the 1980s and 1990s Birth Cohorts in China IntroductionThe economic determinants for marriage have been studied in both western and nonwestern countries (e.g.,Yu and Xie 2015), with more research focusing on individual economic traits (e.g., education and earnings) than on family of origin. However, investigating the link between family of origin and marriage is crucial for answering a number of questions considered by sociologists, including the family-level economic determinants for first marriage timing, the relative importance of ascribed and acquired traits in determining individuals' social outcomes, and whether parental economic resources are transferred to children through marriage(Charles, Hurst, and Killewald 2013). ...
Sociologists and demographers have long sought to investigate the patterns, determinants, and consequences of intimate relationships. As the economic conditions and consumption landscape of young adult lives have shifted, we have gradually observed the delay and even retreat from marriage, the increasing popularity of cohabitation, and the growing instability of unions. Against the background of fast-changing union experiences, this dissertation investigates the precursors and consequences of union formation and dissolution through the triple lenses of birth cohort comparison, social context comparison, and marital behavior comparison. The first paper examines whether the wealth foundation has shifted for marriage and cohabitation formation in the context of the United States by comparing two birth cohorts. The results indicate a rising wealth foundation for both marriage and cohabitation among young adults, particularly in terms of secured and appreciating assets and debt (e.g., home ownership and debt holding). The second paper investigates how family wealth shapes first marriage in China, a vastly different social setting from the United States, in order to test whether this positive association is universal or contingent (context-specific) and whether there are gender and rural-urban differences in this association. The findings reveal that family wealth is a strong positive predictor for first marriage, especially for rural Chinese men. The findings also indicate that gendered marriage practices and family wealth arrangements may lead to Chinese women’s disadvantaged position in wealth possession and yield a severe marriage squeeze for economically underprivileged Chinese men (especially rural men). The third paper explores the consequences of union dissolution, specifically cohabitation dissolution, on mental health outcomes, investigating the moderating effects of gender and parenthood. The findings suggest that gender differences in the association of cohabitation dissolution with psychological distress are contingent upon the types of psychological distress under consideration and also reveal that cohabitation dissolution intertwined with non-marital parenthood is harmful to mental health, especially for young women. Taken together, the three freestanding albeit connected empirical studies illustrate that demographic behaviors are responses of individuals to dramatic social changes, and in return, the influence of demographic behavior shapes individual outcomes and then perhaps further social changes.
... A great deal of research has been conducted on the relationship between homeownership and private wealth. The general literature includes the wealth creation effects of homeownership among different groups and its potential mechanisms (Herbert, McCue, & Sanchez-Moyano, 2014;Killewald & Bryan, 2016;Turner & Luea, 2009), the aggregate impact of homeownership on wealth distribution in different institutional contexts, such as the United States and European countries (Holloway, 1991), and the relationship between homeownership and wealth inequality in China (Knight, 2014;Li & Sicular, 2014;Walder & He, 2014;Xie & Jin, 2015;Zhou & Song, 2016). However, these papers only discuss the relationships and do not explain the underlying mechanisms, especially the dynamic effect of homeownership on the accumulation of private wealth and the difference between urban and rural areas. ...
... Similarly, to support the claim that housing could yield higher shorter-term economic returns than renting and reliance on other investment options, Grinstein-Weiss, Key, Guo, Yeo, and Holub (2013) produced results demonstrating a higher short-term change in total net worth, total liquid assets and total non-housing net worth among homeowners as compared to renters. Herbert et al. (2014) summarized the two primary mechanisms by which homeownership can accumulate wealth for low-income and minority households: one is the substantial wealth that homeowners can accrue from housing price appreciation, and the other is the forced savings under the clear goal of entering homeownership. This latter mechanism also echoes the Canadian evidence. ...
... This required strict discipline in terms of saving and wise investment to achieve high yields and low fees, which probably would not be possible for most people. Herbert et al. (2014) also acknowledged that owning a home is accompanied by both benefits and risks, the most important of which is a failure to sustain homeownership. However, the evidence indicates that a large share of homeowners succeeds in maintaining their ownership, even during a time of excessive risk in the mortgage market and volatility in house prices. ...
Many scholars have evaluated the wealth creation effects of homeownership over different time periods and have agreed on the positive role of homeownership. However, there are no consistent mechanisms to measure the impact of homeownership on wealth inequality. Based on data from 1995 to 2018, this paper finds that the expansion of the homeownership rate in urban China was an equalizing force in the distribution of wealth from 1995 to 2008, driven by the increased homeownership and housing acquisition of low- and moderate-income households (LMIs) during the era of housing reform in the 1990s. The forces were exogenous and dominated by a redistributive logic. In the post-reform era after 2008, the decline in the homeownership rate led to a concentration of wealth distribution that was driven by the widening wealth gap between owners and non-owners, which represented an endogenous market force. The results indicate that there was an apparent discontinuity of the trends of homeownership and wealth inequality because new immigrants could not afford the price of housing in the cities. The wealth position of the middle and lower classes (mainly new immigrant non-owners) was crippled, not only by the inaccessibility of homeownership, but also by the reinforcing effect of the increase in housing prices. This study reveals the different mechanisms of homeownership on wealth inequality and the policy implications for the redistributive effects of the allocation of housing resources.
... This positive outlook toward homeownership is unsurprising given the many benefits (perceived and real) it confers, particularly wealth accumulation. There is, however, ample evidence that the financial returns of homeownership in terms of housing equity, total net worth, and capital gains are significantly lower for African American households than similar White households (Faber and Ellen 2016;Flippen 2004;Herbert et al. 2014;Killewald and Bryan 2016;Mayock and Malacrida 2018;Oliver and Shapiro 2006). Further, Black homeowners are more vulnerable to losing their homes and returning to renting than comparable White homeowners-a trend that coincided with the emergence of the subprime lending market that led to the housing market collapse (Reid et al. 2017;Rugh et al. 2015;Sharp and Hall 2014). ...
... These racially diverging trends are alarming, especially given the critical role that homeownership plays in wealth accumulation and in maintaining racial wealth disparities (Herbert et al. 2014;Bryan 2016, 2018). Of course, being a homeowner matters for wealth insofar as one can sustain homeownership over time. ...
... Of course, being a homeowner matters for wealth insofar as one can sustain homeownership over time. Recent estimates reported that remaining a homeowner generates significant wealth gains, on average, in the range of $3,000 to $14,000 per year (Di et al. 2007;Herbert et al. 2014). Improving on these prior studies by adjusting for confounders that select people into and out of homeownership, Killewald and Bryan (2016) found significant but smaller wealth returns to ownership. ...
Research shows that extrahousehold kin economic resources contribute to the racial gap in transitions into homeownership, but the extent to which these resources matter for racial disparities in exits from homeownership is less understood. Using longitudinal data from the Panel Study of Income Dynamics, 1984-2017, we examine the role of extrahousehold kin wealth and poverty in shaping racial inequalities in the risk of exiting homeownership. Our nonlinear decomposition results indicate that racial differences in family network resources explain a nontrivial portion of the racial gap in homeownership exit, but there is little evidence that the effects of kin resources on exit are moderated by race. Among both Black and White owners, having wealthier noncoresident kin does not lessen the negative impacts of adverse economic or health shocks on the probability of losing homeownership. Our findings have implications for policies and programs designed to buttress the ability of minority households, especially those in financial distress, to sustain the wealth-building state of homeownership.
... National experiences in housing wealth accumulation display both contrasts and commonalities. In most countries, there has been, since the 1970s a growing share of housing wealth accumulation through house price appreciation over time (Killewald and Bryan, 2016) rather than savings payments associated with paying down outstanding mortgage principal (Aarland and Reid, 2019;Herbert et al., 2014;Ruel and Hauser, 2013). This is emphasised in Australia by the widespread popularity of interest only mortgages (usually for the first three years of ownership) which are often associated with loans for rental investment purposes. ...
... We note in passing, that in most advanced economies, housing wealth accumulation (and growing inequalities in that accumulation) is likely to be increased by the design of the three principal homeownership tax benefits -the home mortgage interest deduction (not used in all countries, for instance the UK and Canada), the exclusion of capital gains on the sale of a principal residence, and the exemption from property taxes, rental income taxes and imputed rent taxes (Goodman and Mayer, 2018;Herbert et al., 2014;Somerville et al., 2007). This is emphasised in Australia by the widespread popularity of interest only mortgages (usually for the first three years of ownership) which are often associated with loans for rental investment purpose. ...
... Some scholars agreed that buying a home is considered as an effective property investment (Chyi, 2013;Lim et al, 2018) as it offers the highest risk-adjusted returns (Chyi, 2013). Some postulated that a homebuyer would benefit from rises in the asset value (Reen & Razali, 2016;Herbert, McCue and Sanchez-Moyano, 2013, if they contribute with a modest downpayment (Herbert et al., 2013). Besides that, the homebuyer could increase the investment-return of the house. ...
... Some scholars agreed that buying a home is considered as an effective property investment (Chyi, 2013;Lim et al, 2018) as it offers the highest risk-adjusted returns (Chyi, 2013). Some postulated that a homebuyer would benefit from rises in the asset value (Reen & Razali, 2016;Herbert, McCue and Sanchez-Moyano, 2013, if they contribute with a modest downpayment (Herbert et al., 2013). Besides that, the homebuyer could increase the investment-return of the house. ...
Housing decisions either buying or renting are always associated with financial affordability. Apart from financial conditions, there are other attributes that might influence a housing decision as both homeownership and renting has its own advantages and disadvantages. This study provides perspective on both housing choices, which presents two research objectives. Firstly, to identify the advantages and disadvantages between buying and renting a home and narrative literature reviews and SWOT analysis were used to obtain this research objective. Second research objective is to identify the housing decision trend among young professional and in-depth semi structured interview methods that have been used and analysed using narrative analysis. Briefly, homeownership offers securing a permanent home with stability in mortgage monthly payment while the renting market tends to increase periodically. However, renting is ideal for households who tend to mobility but households with children prefer homeownership due to its offer neighbourhood stability. This study also found that the young professionals were able to afford buying a home at the age 28 and 29 year old, which they were in the rental market or parental home after the student pathways.
... In November 2016, the FTHB share stood at 43.6 percent and 81.8 percent of Government-sponsored Enterprise (GSE) purchase loans 1 and Federal Housing Administration loans respectively (Urban Institute Monthly Chartbook (February, 2017). Given the importance of FTHBs to the U.S. economy 2 and the importance of homeownership in wealth accumulation (Herbert, McCue, and Sanchez-Moyano, 2013) and consumption (Case, Quigley, and Shiller, 2005), numerous efforts have been made to help FTHBs. Such efforts include providing FTHBs with tax credits as additional incentives for homeownership through legislation. ...
... Despite the debate on the causal relationship between homeownership and household wealth gain (e.g., Engelhardt, 1995;Herbert, McCue, and Sanchez-Moyano, 2013), homeownership is widely believed to be an effective way to increase household wealth and consumption (Case, Quigley, and Shiller, 2005). This belief has led to a number of policy programs aiming to foster homeownership with monetary incentives such as tax credits or mortgage interest rate reductions. ...
We study whether first-time homebuyers overpay for their homes and whether the magnitude of the overpayment varies with the diligence of appraisers involved. We present a robust result that first-time homebuyers sort into smaller and cheaper houses, but that once observed and unobserved house characteristics are controlled for, they pay a premium compared to their more experienced counterparts. Our analysis additionally suggests that certain appraisals and appraisers might be able to mitigate this overpayment by inducing downward renegotiation. This research is among the first to contribute both theoretically and empirically to the literature on first-time homebuyers' sales transactions.
... The median net worth of homeowners was $231,000 in 2016 compared to $5,000 for renters (Federal Reserve Bank 2017), and differences in wealth remain even after controlling for observable characteristics (Dietz and Haurin 2003). For low-income households, programs that enable sustainable access to homeownership have the potential to bring them out of poverty and accumulate assets (Herbert et al. 2013). Homeownership contributes to wealth accumulation through forced savings, which is embedded in fully amortizing mortgages where a portion of the monthly payment goes towards the principal (Dietz and Hauring 2003). ...
... Homeownership contributes to wealth accumulation through forced savings, which is embedded in fully amortizing mortgages where a portion of the monthly payment goes towards the principal (Dietz and Hauring 2003). However, there is also evidence that low-and moderate-income households experience less property value appreciation and are more likely to have negative equity or lose their homes in foreclosure than higher income households (Herbert et al. 2013;Mayock and Malacrida 2018;Van Zandt and Rohe 2011). ...
This study of 58 shared equity homeownership programs and 4,108 properties over the past three decades explores growth in the shared equity housing stock, the characteristics of households owning shared equity homes, and the performance of these programs across the nation. Using administrative data derived from the HomeKeeper National Data Hub managed by Grounded Solutions Network, performance metrics are compared across four housing market periods: 1985–2000 (pre-housing bubble), 2001–2006 (housing boom), 2007–2012 (housing bust), and 2013–2018 (housing recovery). Findings from this study not only confirm that shared equity models provide affordable homeownership to lower income families generation after generation, but also establish that the sector provides financial security and mitigates risks for homeowners facing housing market turmoil. In effect, shared equity homeownership mitigates the risks of traditional homeownership, strengthens residential stability, and promotes equitable wealth building.
... They found that, except during the period of the Great Recession, low-income households who transitioned to owning experienced significant gains in wealth compared to households that remained renters. Herbert et al. (2013) assessed data from the Panel Study of Income Dynamics (PSID) covering the period 1999-2009 to assess how owning a home has been associated with changes in low-income household wealth. They concluded that low-income renters experienced an increase of approximately $10,000 less in wealth per additional year compared to their counterparts in low-income households who became homeowners. ...
This paper analyses the impact of homeownership on household well-being in Togo. We apply the difference-in-difference method to longitudinal panel data constructed from the two waves of the Harmonized Household Living Conditions Survey in 2018 and 2021. We found homeownership’s positive and significant impact on households’ economic and subjective well-being. The results remain robust even after several complementary econometric tests are conducted. The study also highlights specific characteristics based on the gender of the head of the household and the household’s place of residence. The implications of the study’s findings are discussed regarding economic policy recommendations.
... Having access to affordable housing can help people achieve financial stability and build wealth. Homeownership is the primary means by which most families build wealth, and it has continued to be associated with gains in wealth over the past several decades across income levels and racial and ethnic groups (Herbert, McCue, and Sanchez-Moyano 2014). Researchers have found a strong relationship between wealth accumulated through homeownership by parents and higher rates of college completion and higher future income of their children, controlling for other factors (Boehm and Schlottmann 1999;Johnson 2020). ...
Although homeownership is commonly portrayed as a single household living in a detached residential structure, the landscape of homeownership in the United States offers a diverse array of homeownership opportunities beyond traditional single-family homes with a single or married-couple borrower(s), some of which provide more affordable entry points into homeownership for low- and moderate-income (LMI) households. This brief identifies and quantifies these homeownership types for the United States and Western U.S. states in the 12th Federal Reserve District.1 These homeownership types include condominiums (condos), housing cooperatives (co-ops), community land trusts (CLTs), tenancies in common (TICs), multiunit buildings with an onsite owner, homes with accessory dwelling units (ADUs), and homeowners sharing a unit with extended family or others. The brief develops a typology organizing these homeownership categories by whether they involve shared ownership, a shared property, or shared occupancy. The brief outlines and contextualizes each homeownership type and provides estimated unit counts for each geographic scale, where possible. It then discusses innovations in the community development field, as well as outstanding barriers to development and lending for new units in different homeownership categories. Finally, the brief outlines additional research and data collection needed to further clarify the accessibility and distribution of these homeownership types.
... The largest source of intergenerational wealth loss is likely the result of property takings. This was a significant loss, because homeownership, despite racist terms and exclusions, has historically been the primary source of lowincome and minority wealth accumulation (Herbert, McCue, and Sanchez-Moyano 2013; 1 2 3 6. The present-day value of properties in areas that were subject to urban renewal have arguably been affected by the clearance and redevelopment that took place within these neighborhoods. ...
... There exists persistent racialized inequalities in housing despite the de jure elimination of segregation and discrimination in the U.S. [85]. Homeownership is one of the primary ways to build wealth in the U.S., and the gap between the percentage of white Americans who are homeowners and the percentage of Black Americans who are homeowners has increased since the 1960s [11,40,58]. This is a result of the legacy of historical redlining and segregation, as well as present-day structural barriers to homeownership for Black Americans. ...
Recent conversations in the algorithmic fairness literature have raised several concerns with standard conceptions of fairness. First, constraining predictive algorithms to satisfy fairness benchmarks may lead to non-optimal outcomes for disadvantaged groups. Second, technical interventions are often ineffective by themselves, especially when divorced from an understanding of structural processes that generate social inequality. Inspired by both these critiques, we construct a common decision-making model, using mortgage loans as a running example. We show that under some conditions, any choice of decision threshold will inevitably perpetuate existing disparities in financial stability unless one deviates from the Pareto optimal policy. Then, we model the effects of three different types of interventions. We show how different interventions are recommended depending upon the difficulty of enacting structural change upon external parameters and depending upon the policymaker's preferences for equity or efficiency. Counterintuitively, we demonstrate that preferences for efficiency over equity may lead to recommendations for interventions that target the under-resourced group. Finally, we simulate the effects of interventions on a dataset that combines HMDA and Fannie Mae loan data. This research highlights the ways that structural inequality can be perpetuated by seemingly unbiased decision mechanisms, and it shows that in many situations, technical solutions must be paired with external, context-aware interventions to enact social change.
... This sector constitutes a small fraction of enrollment but one-fifth of outstanding student debt (Looney and Yannelis 2015). 7. See, e.g., Baum (2009) and Herbert et al. (2013) on the importance of a vehicle or home for labor market advancement and wealth accumulation. 8. ...
Labor market shocks and financial stresses are shaping how older workers fare as they head into retirement, as well as how younger workers are preparing financially for their future. These shocks come on top of long-standing concerns surrounding increasing longevity and the adequacy and sustainability of public and private benefit systems. Drawing on exciting new datasets and the perspectives of seasoned as well as new researchers to the field, this volume explores how financial and labor markets, and social as well as private insurance programs, are driving the need for new policy to meet these challenges, along with the need for adaptive changes by households, in an effort to enhance retirement resilience.
... This sector constitutes a small fraction of enrollment but one-fifth of outstanding student debt (Looney and Yannelis 2015). 7. See, e.g., Baum (2009) and Herbert et al. (2013) on the importance of a vehicle or home for labor market advancement and wealth accumulation. 8. ...
Labor market shocks and financial stresses are shaping how older workers fare as they head into retirement, as well as how younger workers are preparing financially for their future. These shocks come on top of long-standing concerns surrounding increasing longevity and the adequacy and sustainability of public and private benefit systems. Drawing on exciting new datasets and the perspectives of seasoned as well as new researchers to the field, this volume explores how financial and labor markets, and social as well as private insurance programs, are driving the need for new policy to meet these challenges, along with the need for adaptive changes by households, in an effort to enhance retirement resilience.
... Currently, BTR is a forward-thinking sector within the real estate field. It offers a range of housing options and amenities to tenants while also providing investors with the potential for an investment opportunity (Herbert et al, 2013, Nethercote, 2020 Preference of consumers due to the decline in availability and affordability of -For-sale‖ construction, low income, customization, flexibility, professional management, choice of housing preference, amenities, and supply-demand imbalance are the major factors contributing to the rise of Build-To-Rent (Carvalho et al., 2023). With the increase in the global population, associated needs such as housing requirements are on the rise. ...
The rise of the Build-to-Rent (BTR) community trend in the United States is a subject of increasing interest to real estate professionals, investors, and academics alike. Build-to-Rent communities are not a new concept, but their popularity has been on the rise in recent years. Historically, single-family homes and apartment complexes have been the primary options for rental housing. However, several factors have contributed to the growth of BTR communities. Thus, this article analyzes the sustainability of build-to-rent homes and communities in the United States. It examines the distinct features characterizing these communities and contrasts them with conventional housing models. Through a comprehensive analysis, this paper contends that the surge in build-to-rent communities may not be as innocuous as initially perceived. Rather, it asserts that this trend warrants closer scrutiny due to ramifications for the government, the American populace, and the economy. Contrary to prevailing notions, the growth of build-to-rent communities emerges as a subject of concern, raising pivotal issues that necessitate attention, irrespective of its substantial trajectory. While existing research on the rise of build-to-rent (BTR) communities has extensively explored the economic, demographic, and urbanization factors driving their emergence, there remains a notable research gap about the long-term social sustainability and community dynamics within these housing developments. By investigating the underlying factors driving the ascent of Build-To-Rent communities, the study explores the long-term disadvantages of their proliferation.
... Importantly, a number of papers show that differences in housing price appreciation for racially diverse neighborhoods affect housing wealth outcomes accumulation for Black homeowners (examples include Flippen [2004], Immergluck et al. [2019], and Newman and Scott Holupka [2016]). Yet Santiago et al. (2010) and Herbert et al. (2013) still demonstrate consistent positive financial gains to lowincome and nonwhite homeowners from homeownership overall. Recent work by Kermani and Wong (2021) suggests that financial distress is a key driver of these wealth disparities, making this work to identify the key components of housing costs particularly important. ...
Housing affordability is a key policy concern and an important component of sustainable homeownership. It follows that reducing housing costs without increasing the risk of mortgage default is a critical approach to sustaining homeownership for current and future generations. In this paper, we break down the different elements of housing costs, specifically focusing on the nuances of mortgage costs. We use internal Fannie Mae data to establish a pro forma of housing costs for different owner-occupant borrower profiles over a typical ownership period (all homebuyers, first-time homebuyers [FTHBs], and low-income first-time homebuyers [LI FTHBs]). We find that the biggest contributors to overall housing costs are transactions costs, ongoing utility expenses, property taxes, home improvement costs, and the component of the mortgage interest rate that compensates investors for the time value of money, with utilities and home improvement costs particularly conspicuous for FTHBs and LI FTHBs. The guaranty fees charged by the government-sponsored enterprises and private mortgage insurance are estimated to be less than 6% of the cost of homeownership. These general patterns hold across racial and ethnic groups, although mortgage insurance alone is roughly 6% of total costs for Black and Hispanic FTHBs and LI FTHBs compared to 2% for white FTHBs and LI FTHBs. Overall, our findings suggest that nonmortgage housing costs are key areas that policymakers should focus on to reduce housing costs and foster sustained homeownership rates.
... Although significant attention has been placed on the locational effects of mobility-oriented housing programs on low-income renters, only a limited strand of literature has examined neighborhood outcomes for low-and moderate-income homeowners. Homeownership can provide a valuable wealth-building opportunity for low-income households (Herbert et al., 2013). For low-and moderate-income households, however, accessing affordable homeownership may impose costs, including worse locational outcomes than if they continued to rent (Gabriel & Painter, 2008;Reid, 2007). ...
The impact of U.S. housing policy on household locational outcomes has primarily been studied in the context of rental housing assistance programs, but the impact of alternative homeownership models is less fully explored. In this study, we assess residential trajectories for households that have participated in shared-equity homeownership (SEH) programs such as Community Land Trusts and Limited Equity Housing Cooperatives. We examine changes in neighborhood characteristics that occur when households enter and exit SEH units, and compare those outcomes with similar households that entered traditional homeownership or continued to rent. We find that while entering SEH is associated with decreases in neighborhood opportunity measures, exiting SEH is associated with improvements in key measures including lower concentrations of poverty. We conclude that while entering SEH may entail moving to lower-opportunity neighborhoods, participation in SEH programs increases the long-term economic and socio-spatial mobility of participating households by enabling them to access a broader array of neighborhood contexts in their subsequent move.
... The racial gap in homeownership persists (Choi, 2020;McCargo et al., 2019;Veal & Spader, 2019) and is widest (33.8 percentage points) for households in the prime homebuying years of 35-44 (JCHS, 2021). Black homeowners return to renting at twice the rate of White owners (Sharp et al., 2020), and lowincome owners and households of color realize less wealth (Faber & Ellen, 2016;Herbert et al., 2013). Although linked to lower rates of homeownership for households of color (Schuetz, 2020;Williams, 2017), ameliorating the racial wealth gap is unlikely absent other measures that address the effects of discrimination, segregation, and existing intergenerational wealth disparities (Markley et al., 2020;Williams, 2017). ...
Relying on market-based housing policies has been inadequate to meet the need for affordable and sustainable housing and has heightened disparities in the housing system, especially along lines of race and gender. Community land trusts (CLTs) promise more equitable ways of providing stable, secure, and affordable housing for those marginalized in market-based housing. Yet there has been limited research comparing CLT housing with mainstream tenures. Using data from the first sample survey of CLT owners (N = 216) that includes comparison groups of market owners (N = 142) and renters (N = 130) drawn from similar low- and moderate-income populations, we find that those who purchase CLT homes are similar demographically to renters but compared with market owners are more likely to be Black and from households headed by women. We find no difference between CLT and market-rate homeowners in terms of benefits often attributed to homeownership, specifically financial well-being, stability, and a sense of house as home. CLT owners report having more time and resources to pursue desired activities than do market owners. Despite their demographic similarity to CLT owners, renters fare worse on all of these dimensions. We conclude with policy recommendations for housing tenures that provide permanent affordability, greater social equality and greater democratic resident control.
... For example, approaches to taxation and redistribution along with economic regulation are associated with traditional party platforms (Republican/conservative and Democrat/liberal) (Berry et al., 2010). Further, we might expect a more conservative state legislature to favor market-based tax credits and regulations that reward homeownership, which can incentivize certain forced savings and wealth accumulation (Herbert et al., 2013). Home ownership is important here because it has been shown to be positively correlated with emergency savings (Despard et al., 2020). ...
The majority of American families lack the savings necessary to overcome an unexpected financial shock. Sherraden’s (2013) financial capability framework – objective financial knowledge, subjective financial knowledge, financial confidence, and financial access – has been used to explain patterns of emergency savings. To date, research in this vein has been conducted almost entirely using individual level variables, leaving the issue of how context shapes financial capability’s relationships to emergency savings largely unaddressed. Using four waves of the National Financial Capability Study (2009, 2012, 2015, and 2018), we estimate multi-level probit models of emergency saving as a function of objective financial knowledge, subjective financial knowledge, financial confidence, savings account ownership, adjusting for a host of state characteristics and financial inclusion indicators. We decompose financial capability constructs into between- and within-state components and find that financial capability constructs operate mostly at the individual level. State’s levels of savings account ownership and government ideology were positively associated with increased likelihood of holding emergency savings. Financial inclusion measured by bank account and credit union access explained little. Programs that target individual level financial knowledge and confidence and state policies that promote savings account ownership have promise to raise the low rates of emergency savings.
... Lower home values reduce the positive association between homeownership and mortality at the neighborhood level, suggesting that the health benefits of homeownership are contingent upon neighborhood conditions that also negatively affect home values [7]. The fluctuations in house prices put any progress in housing equity at risk [8][9][10]. The last financial crisis highlighted the unequal risks of homeownership when mortgage brokers systematically targeted households in neighborhoods dominated by people of color for subprime and predatory loans, resulting in disproportionate rates of default and repossession in these neighborhoods [11,12]. ...
Few studies have examined the combined effects of affordability, housing conditions and neighborhood characteristics on the housing stability and health of low-income homeowners. We begin to address these gaps through a mixed-method study design that evaluates the Make-it-Home program (MiH) in Detroit, Michigan, aimed at helping low-income tenants become homeowners when their landlords lose their homes to tax foreclosure. We compare the ‘intervened group’ of MiH homeowners to a ‘comparison’ group of similarly situated households whose homes experience property tax foreclosure at the same time. The comparison group represents the likely outcomes for the participants had they not participated the program. Participants will be surveyed twice (intervened group), or once (comparison group) per year over a three-year period, regarding their housing and neighborhood conditions, health, life events, and socio-economic status, including income and employment. We will use property and neighborhood census data to further examine the conditions experienced. The findings for policy and program development from this study are timely as the nation faces a chronic shortage of affordable housing for both purchasers and renters. The results suggest ways to improve the MiH program and lay out approaches for researchers to navigate some of the complexities associated with this type of research.
... Many researchers have argued that taxation is an important factor, particularly as a policy tool, in influencing housing tenure and homeownership rate. Herbert et al. (2014) summarize several studies that identify whether owning or renting is likely to be more financially beneficial and the circumstances while considering the tax effect. For instance, assuming that owners can take full advantage of tax benefits at a 28% marginal rate and 7% of rent-to-value ratio, Mills (1990) finds that a holding period of slightly longer than 7 years is necessary for preference to own. ...
This paper develops a theoretical model for equilibrium rent-to-price ratios from the competition between households and investors in the housing market. Households make their housing tenure choice in terms of rent vs. buy such as minimizing the cost of occupying a housing unit. On the other hand, investors choose between investing in rental housing vs. other investment opportunities in order to maximize their net present value. In the face of limited housing inventory, households and investors bid against one another which determines the allocation of the housing units among households (owner occupied properties) and investors (rental properties). We derive the sensitivity of the equilibrium rent-to-price ratio with respect to various market parameters, and subsequently analyze their potential impacts on the homeownership rate in the community. We show that some government mortgage programs subsidize homeownership to increase the affordability of owning a house, but may also provide even more incentive to the housing investors. Unless the government can effectively control the eligibility of borrowers, such affordable mortgage programs could work against their objectives and lead to higher housing prices and lower homeownership rates. Our model framework can be used to analyze the potential impacts of some of the new affordable housing policies on house prices or homeownership rates before adopting them.
... However, the limited housing land makes housing unit prices more expensive so that low-income communities cannot reach it [5]. Whereas owning a house is an important element of society because it is considered an effective way to accumulate wealth for low-income households, which underlies efforts to support homeownership in the last few decades [6][7][8]. Based on the economic policy package volume 13 on Housing for Low-Income Communities (MBR), it is hoped that civil servants can get decent housing facilities at affordable prices [9]. The housing program, especially for low-income communities, is called the One Million Houses Program [10]. ...
The problem of meeting housing needs for low-income communities is the inaccessibility of prices on the housing market. The Salatiga government has made efforts to meet this need by building low-cost houses for civil servants that utilize Government Land, thus keeping prices far below standard. As time went on, these cheap houses that belong to civil servants were not used as residential for the owners, but most of them became long-term investments. Based on these problems, the study aims to examine the impact of the low-cost house construction, namely KORPRI Housing in Prajamukti, Salatiga City of residential and investment functions. The method used is quantitative, primary data collected through field observations and interviews with residents and housing provider stakeholders. Meanwhile, secondary data obtained through government agencies and websites. The analysis technique uses a quantitative descriptive method and map overlay. The results showed that the function of houses is 60% for investment by rent out the housing to others, 30% as residential functions for civil servants, and 10% sold to other people. This condition is due to the status of the house is not the owner’s first home, strategic housing location, and triggered by an increase in land value. The contribution of this research is that previous researchers discussed a lot about the construction of cheap houses that received subsidies from the government, whereas in this study, the price reduction was the result of taking land assets belonging to the government in the form of Government Land.
... This study focuses on the factors affecting home ownership that comprises housing affordability and accessibility for the liveable city concept. Housing policy is essential to assist renters and owners to obtain affordable and quality homes (Herbert et al. 2013). In addition, in 2018 there was a change in the formation of a new government in Malaysia. ...
Home ownership is one key factor of the principles of livability towards achieving liveable city. In addition, there are also many factors affecting home ownership which includes income, location and accessibility factor. Various issues have been discussed by the Government of Malaysia in addressing the concern of home ownership, especially for the middle- and low-income groups in many cities in Malaysia. Using the case of Kajang city, this article aims to achieve the objective of identifying the major factors affecting home ownership for liveable city focusing the middle-income earners. Purposive sampling was used and in-depth interviews method were conducted with 41 potential homebuyer, 60 homeowners and 20 housing experts representing the Federal Government agencies, State Government agencies, Municipal Government, Developers, Banks and Real Estate-Related Consultant. The result of the study shows that the main factors affecting home ownership are income, housing loan scheme, location, government role, developer role, PR1MA affordable housing scheme, construction cost, Bumiputera quotas, lifestyle, quality of life, real estate investment and transfer, assessment/property tax, land ownership by foreigners and ownership title. The findings show that the Kajang City is an example of a city that can contribute to the affordable housing strategy requirements towards achieving liveable city. The findings also will help key stakeholder in addressing the main issues of housing affordability in the State of Selangor.
... Research finds that owning a home is an important mechanism for wealth creation (e.g. Herbert, McCue, and Sanchez-Moyano, 2013), and it also brings many social benefits for families, communities, and the country as a whole (e,g. Green and White, 1997;and Glaeser and Sacerdote, 1999). ...
This paper studies how banking deregulation affects homeownership. Exploiting the U.S. intra-state and interstate banking deregulations from 1980s to early 1990s, we find that an exogenous expansion of bank branches increases renters likelihood of becoming homeowners as much as 8.7 percentage points. In addition, the impact is larger on households with low income and high debt-to-income ratios. Our estimated impacts are larger than those estimated from state-level data, suggesting that the heterogeneous effects among households are important towards home ownership. Our findings are robust to potential sample selection bias and functional misspecifications.
... In the literature of racial inequality, homeownership receives a significant amount of attention for its contribution to the racial wealth gap (Famighetti and Hamilton, 2019;Herbert et al., 2013;Kuebler, 2013;Markley et al., 2020). Unlike renting, owning a home is expected to provide stable housing that appreciates over time and may provide a financial cushion in times of economic recession. ...
In recent decades, the racial wealth gap has widened with extant literature reporting that Black and Latinx families hold fewer assets than white families. One such asset that receives substantial attention because of its wealth-generating principles is homeownership. Whereas intergroup homeownership inequalities are found throughout the literature, less is known about racialized inequality within groups. Latinxs provide a novel case for exploring how racialized homeownership inequality is structured within an ethnic group. Using data from the American Community Survey, we examine the odds of homeownership and predicted logged home values among Latinxs. We find that the association between race and housing outcomes varies substantially across Latinx groups. Drawing from theories of Latinx racial identity and the future of racial structures, we discuss the implications of our findings for understanding racial inequality among Latinx groups.
... Several papers analyze the importance of asset ownership (such as vehicles or homes)-which is often financed by borrowing-for labor market advancement and wealth accumulation (e.g.,Baum 2009;Herbert, McCue, and Sanchez-Moyano 2013). ...
This paper examines how minimum wages affect lender and borrower interactions with consumer credit markets. We find that higher state minimum wages increase the supply of unsecured credit, reduce payday loan usage, decrease delinquency, and increase credit scores. Overall, minimum wages reduce borrowing costs and have positive spillover effects on disposable income and liquidity. A back-of-the-envelope of the cost savings indicates that higher minimum wages increase disposable income by 1.3% more than implied by estimates of the direct effect on earnings.
... DECIDING WHETHER TO RENT OR OWN A HOME Scholars have identified many reasons why families decide to become homeowners (e.g., Chellman et al. 2011;Dupuis and Thorns 1998;McCabe 2018;Reid 2014), yet two key assumptions prevail in the literature. The first is the notion that "home-as-haven" has given way to "home-as-jackpot" (Sugrue 2014), and that families are driven to purchase homes because of the financial incentives (Belsky et al. 2007;Boehm and Schlottmann 2004;Herbert et al. 2014). The second is based on the life cycle perspective, which argues that, as people start having children, they become more interested in staying in one place for a longer period of time, which leads to changes in housing tenure (Gyourko and Linneman 1997). ...
Despite decades of research on residential mobility and neighborhood effects, we know comparatively less about how people sort across geography. While there are reasons for lagging developments in the area of residential decisions, we join others in calling for research to consider residential selection as a social stratification process—one ripe with significant conceptual and policy potential. In this paper, we present findings from work our team has done over the last 17 years to explore how people end up living where they do. We focus on four key decisions: whether to move; where to move; whether to send children to school in the neighborhood; and whether to rent or own a home. We found that many residential mobility decisions among the poor were “reactive,” with unpredictable shocks forcing families out of their homes. As a result of reactive moving, time frames became shorter as poor parents employed short‐term survival solutions to secure housing instead of long‐term investment thinking about neighborhood quality and schools. These shocks, constraints, and shorter time frames led parents to decouple important aspects of neighborhood and school quality from the housing search process while maximizing others like immediacy of shelter, unit quality, and proximity to work and child care. Finally, we found that policies can have a significant impact on some of these decisions. Combined, our research revealed some of the decision‐making processes that underlie locational attainment and the intergenerational transmission of neighborhood context.
... However, slightly lower gains are associated with lower-income and nonwhite households. 166 Foreign-born households in Dallas are 3.9 percent more likely to be renters compared to nativeborn residents (61.6 percent compared to 57.7 percent). 167 Homeownership rates among foreignborn households are affected by country of origin, length of time in the United States, citizenship status, language ability, and cultural perceptions of homeownership. ...
In 2017, Dallas became one of the two dozen US cities that established “welcoming communities” as part of immigration incorporation initiatives. Immigrants play a crucial role in the vitality of the city – 25 percent of Dallas residents are foreign born, and 32 percent of the labor force in the Dallas metro area are immigrants. The Dallas Office of Welcoming Communities and Immigrant Affairs (WCIA) developed a multi-faceted strategic plan to promote the successful inclusion of immigrants into the social and economic fabric of the Dallas community. Our research couples the aspirations of the Dallas WCIA strategic plan with the expertise of the LBJ School of Public Affairs graduate students. This Policy Research Project (PRP) centers on policy analysis and methods to measure immigrants’ attitudes about life in Dallas, to delineate immigrant and refugee residents’ access to services, to analyze how Dallas scores on indices based on measures of integration, and to offer policy tools to foster the incorporation of immigrants into Dallas. Our analyses approach immigrant incorporation from three distinct vantage points. The first is assessing how Dallas compares to other major US cities on immigrant inclusion. This tier explores methods of measuring immigrant inclusion and techniques for comparing cities on these standardized indices. The second analyzes census tract data for the City of Dallas to discern the residential patterns of immigrants and the demographic and socioeconomic features of these neighborhoods. The third queries the immigrants themselves to gather insights on the extent that they feel included within the broader Dallas community.
... Some owners are more likely to invest in real estate. According to Herbert et al. (2013), variables of the homeownership category indicate whether 'own to rent', 'rent to own sustained', 'rent to own not sustained' or 'own with interruption'. ...
Infrastructure equipment is one of the key factors contributing to liveable city and effectively tackling quality of public services. Local government and municipalities played the leading actor role as many projects related to sustainability involve public initiatives to improve local services, infrastructure and environmental conditions. According to economic theory, they should either obtain supplementary funding (assessment tax) or otherwise reduce the quality levels of the services provided. The aim of the present study is to evaluate liveable the level of satisfaction with the infrastructure access according four aspects of municipal performance namely accessibility, flexibility, connectivity and sustainability. Lack of infrastructure access or services provided are unsatisfactory affect ownership thus affordability and availability are much reduced. Sustained infrastructure access can ensure sustainable home ownerships and support the housing market thus affordability level is favourable.
... Housing price fluctuations can make investment in homeownership precarious, particularly under short time horizons. 2 Unsustainable 2 For a discussion of the costs and benefits of homeownership in the aftermath of the housing crisis, see Herbert et al. (2013). homeownership can lead to financial distress and, in the worst cases, foreclosure. ...
Congress and many researchers and practitioners in the field of housing counseling have asked whether pre-purchase homeownership counseling for first-time borrowers leads to better borrower outcomes and reduced lender risk relative to no counseling. HUD designed The First-Time Homebuyer Education and Counseling Demonstration as a large-scale randomized experiment to answer the question about the relative efficacy of homebuyer education and counseling on first-time borrowers. The Baseline Report demonstrates that HUD has successfully implemented the first large-scale national experiment of homebuyer education and counseling. The study has successfully enrolled a diverse sample of over 5,800 first-time homebuyers across 28 large metropolitan areas, and has randomly assigned them to three treatment groups that were offered “remote” (on-line education and telephone-based counseling), “in-person” (group workshops and individual counseling), or a “choice” of remote or in-person homebuyer education and counseling services, and a control group that was not offered any services. The Baseline report describes the study design, implementation, characteristics of the full study sample, and the treatment groups’ experiences with the intervention including an analysis of take-up rates and focus group discussions.
... Associates, 2014). 6 For a discussion of the costs and benefits of homeownership in the aftermath of the housing crisis, see Herbert, McCue, and Sanchez-Moyano (2013 As the first large-scale national experimental evaluation of homebuyer education and counseling, the First-Time Homebuyer Education and Counseling Demonstration attempts to fill this critical research void. ...
Congress and many researchers and practitioners in the field of housing counseling have asked whether pre-purchase homeownership counseling for higher risk borrowers leads to better borrower outcomes and reduced lender risk relative to no counseling. Prior research has suggested there are benefits of pre-purchase homeownership counseling, but those benefits have been questioned for over 20 years by concerns that those who choose counseling may be different than those that who do not choose to get counseling (selection bias). HUD designed The First-Time Homebuyer Education and Counseling Demonstration as a rigorous, large-scale, randomized experiment to definitively answer the question about the relative efficacy of homebuyer education and counseling on higher risk borrowers. This Early Insights report demonstrates that HUD has successfully implemented the first large-scale national experiment of homebuyer education and counseling that promises to become a foundational source of evidence for policymakers, lenders, and housing counseling practitioners and advocates regarding the impacts of homebuyer education and counseling.
... Home ownership contributes to wealth creation because of the forced saving built into mortgage repayments and by any unearned capital gains. Belief in the wealth-generating property of housing has underpinned a widespread preference for owning over renting (Herbert et al. 2013). Periodic housing price declines, nevertheless, indicate the risks associated with wealth creation and raise questions about these economic benefits. ...
Home ownership has been seen as a core aspiration and value for most, if not all, Australians from European settlement to the present. This chapter begins by examining Australia’s home ownership rate in a comparative context. Trends in this rate, changes in government support for home ownership and the reasons for emerging concerns about falling rates of home ownership, particularly among younger households, are covered next. The question of why home ownership has a dominant role in Australia and in countries with similar economic, institutional and cultural backgrounds is then addressed. Whether the support provided to this tenure, especially, the tax/subsidy concessions that accrue to homeowners, is an appropriate role for government is also considered.
... Scholars have revealed that subjective social class is strongly associated-although not perfectly coinciding-with objective social class (Jackman and Jackman 1973;Evans and Kelley 2004;Chen and Williams 2018). Homeownership is often related to improved household wealth, employment, and educational achievement (Zavisca and Gerber 2016;Turner and Luea 2009;Herbert et al. 2014;Dietz and Haurin 2003). The increased objective social standing can be reflected by the elevated perceived social status (Evans and Kelley 2004;Chen and Williams 2018). ...
Housing has become a major dimension of socioeconomic inequality in contemporary China. This study investigates the effects of homeownership and housing wealth on people’s subjective class identification in urban China. Using the data from the China Family Panel Studies (CFPS) from 2010 to 2016, we estimate fixed-effects models and show that growth in housing wealth improves people’s perceived social status, and the improvement is greater in more economically developed areas with higher real estate prices and greater housing inequality. Owning a home enhances subjective social class only in eastern coastal regions but not in inland regions. These findings suggest that as homeownership expands and becomes universal in a society, the psychological benefits of homeownership may diminish, but the subjective impact of housing wealth would increase. The study contributes to the literature on the social consequences of housing in a transitional society that is experiencing rapid housing privatization and increased housing stratification.
... TPO revenues will be greater since the value of the dwelling has increased due to the restoration works carried out and the improvements made. Within the housing sector, there are moments when the appreciation of the property value is real (Herbert et al., 2012;Nasarre-Aznar and Molina-Roig, 2017). On the other hand, if this dwelling is rented after implementing energy-efficiency improvements, the monthly rent that the owner would collect would be higher, and that would also be reflected in the owner's PIT. ...
This paper analyzes the tax incentives and aids adopted in the taxes and environmental policies to improve the energy efficiency of Spanish households. The established environmental policy presents advances although with incipient results, since the energy efficiency of the houses still plays a secondary role. In the area of taxes, no tax incentives have been effective in reducing the investment in improvements in the energy efficiency of homes, especially in those of old construction. Our conclusions indicate the convenience of promoting the energy efficiency of homes through the fiscal route. In this sense, it proposes incorporating an incentive to the Personal Income Tax linked to improved energy rating of housing. Also, it raises the improvements in the current regulations on tax benefits on the Real Estate Tax and on the Tax on Building, Installations and Infrastructural Work. These are two of the main features of this paper.
Real house prices in the United States have risen by 55 percent over the last four decades, driving substantial wealth benefits to homeowners. However, research has not explored how this rise in house prices has affected White-Black wealth gaps, or the mechanisms that may underlie this relationship. Using geocoded longitudinal household-level wealth data from the Panel Study of Income Dynamics and tract-level house price index data, I estimate that housing market appreciation between 1984 and 2021 explains 70 percent of the increase in the median White-Black wealth gap over this period. I find that most of this effect is due to White-Black gaps in homeownership, with White-Black gaps in house values playing a smaller role. In contrast to recent findings about racialized housing markets, I do not find that gaps in neighborhood house price appreciation between White and Black homeowners contributed to White-Black wealth gaps in the 2000s and 2010s. These results highlight the importance of cumulative advantage processes in driving wealth inequalities and demonstrate how the legacies of institutional racism contribute to contemporary racial wealth gaps.
Prior scholarship has documented and tried to explain growing inequalities in individual wealth holdings—especially between homeowners and renters—but has not considered the role of residential position in the rural-urban hierarchy. We estimate fixed-effect models of one’s rank in national net, housing and financial wealth distributions during the 2010–2018 period, based on Norwegian register data on prime-age individuals. We find dramatic geographic differences in trajectories of wealth accumulation that are strongly conditioned by tenure. Residing longer in a more urbanized area—especially in the central Oslo region—results in a substantially higher net wealth position only for homeowners. This result is driven overwhelmingly by their greatly superior gains in housing wealth over the period. By contrast, the net wealth and financial wealth positions for those who always rent are virtually indistinguishable across the hierarchy, regardless of duration of residence. Our evidence suggests that the positive correlation between earnings and rent levels across the rural-urban hierarchy yields this result.
The view of owning a home as integral to the "American dream" is enshrined in numerous policies designed to promote homeownership. Whether or not these policies are worth their cost is unclear and depends, in part, on the extent to which owner-occupied housing (OOH) confers socially important benefits. Yet identifying the effects of OOH is complicated, not only due to standard concerns about selection, but also because OOH tends to be located in neighborhoods with better amenities (including schools) and is often synonymous with living in a single-family home. In this paper we use rich, longitudinal student-level data to examine whether students in OOH have better academic and health outcomes than those in renter occupied housing (ROH). We address concerns about selection using student fixed effects and a rich set of individual, building, and neighborhood controls. We find that that there is notable variation in both the characteristics and size of OOH and the types of students who live in OOH in NYC. While raw differences show that students who live in OOH have better outcomes-they are less likely to be chronically absent, obese, or overweight and have higher standardized test scores-much of this disparity is explained by differences in the students who select into OOH. In models where we account for selection into OOH and building type with rich controls and student fixed effects, we find small positive effects of moving into OOH on attendance and math scores with no consistent evidence of any impacts of OOH on BMI or obesity, suggesting that policies that promote homeownership might be oversold.
Borrowing for education has increased rapidly in the past several decades, such that the majority of non-housing debt on US households' balance sheets is now student loan debt. This chapter analyzes the implications of student loan borrowing for later-life economic well-being, with a focus on retirement preparation. We demonstrate that families holding student loan debt later in life have less savings than their similarly educated peers without such debt. However, these comparisons are misleading if the goal is to characterize the experience of the typical student borrower, as they fail to account for student borrowers who already paid off their debt. We develop strategies to locate families that ever financed their education with student loans in two large datasets which enables us to draw more meaningful comparisons. We find that student loan borrowers roughly follow the earnings, saving, and wealth trajectories of other college-educated families into late-career ages and are much better off financially than those that did not attend college.
As accumulating wealth is a vital component of financial well-being, this paper aims to gain a better understanding of why African Americans do not accumulate wealth at the same rate as other racial groups. Researchers utilize data from the 2019 Survey of Consumer Finances (SCF) to estimate the parameters of logistic regression specifications to examine the factors that determine wealth accumulation for African Americans. Researchers found that African Americans were less likely to have low wealth if they owned their own homes and more likely to have low wealth if they did not save. Saving and homeownership had more of an impact on wealth accumulation for African Americans than for White Americans. Furthermore, African Americans who did not invest in the stock market were more likely to have low wealth, as investing also had more of an effect on wealth accumulation for White Americans than for African Americans.
For 3 decades, U.S. federal housing policies have sought to increase access to socially diverse and high opportunity neighborhoods and improve the quality of life for low-income families. Absent from current discussions of the costs and benefits of socially mixed communities is the potential value that they may have to low-income families seeking to purchase their own homes. In this paper, we examine the extent to which participation in homebuyer education and counseling programs supports sustainable low-income homeownership in socially mixed neighborhoods. Using quasi-experimental methodologies and longitudinal data from the Denver Housing Study for a sample of 533 low-income homebuyers, this study examines whether, compared with a comparison group of public housing residents who purchased homes on their own, participants in Denver Housing Authority’s (DHA) homebuyer education and counseling program (HOP) were (1) more likely to purchase homes in socially mixed destination neighborhoods; and (2) sustain homeownership over time. Results show that low-income homebuyers purchased homes in destination neighborhoods characterized by considerable ethnic and income mix. When compared to non-HOP homebuyers, HOP homebuyers also were better off in terms of 2018 home value appreciation and fewer foreclosures, suggesting that homebuyer education and counseling improves long-term sustainability of homeownership.
Following the Great Recession, homeownership rates declined precipitously, raising concerns for the stability and well‐being of neighborhoods. While many studies document shifts in household constraints, this article draws from foreclosure records from 2006 to 2011, subsequent transactions, tax exemption filings, and maintenance data in Boston, Massachusetts to show how the foreclosure crisis altered the landscape of ownership and unfolded differentially across hard‐hit neighborhoods. Results from logistic regression analyses show that corporate investors were more likely to purchase foreclosures in predominantly black hard‐hit neighborhoods, while owner‐occupants were more likely to purchase foreclosures in hard‐hit mixed‐ethnoracial neighborhoods with substantial shares of non‐Hispanic/Latinx whites. Relative to other foreclosure buyers, corporations were more likely to resell previously foreclosed properties to other investors and have reported maintenance issues against them. The findings have implications for further disadvantages for hard‐hit black neighborhoods and highlight how the housing crisis exacerbated neighborhood inequality by race and ethnicity.
The analysis presented in this article finds little evidence to suggest that individuals' preferences for owning versus renting a home have been affected by their exposure to recent house price declines and loan delinquency rates, or by knowing others in their neighborhood who have defaulted on their mortgages. Instead, this analysis finds individual characteristics, particularly current housing tenure, to be the strongest predictors of postrecession demand for homeownership.
This chapter analyzed the growth in home equity and its determinants. From our cohort and cross-sectional study, we found that the home equity increase from 1985 to 2001 was widely experienced by every age, geographic, and demographic group. Through the period we studied, an increase in leverage was observed for the same age groups. Our cohort study found that the increase in leverage by age cohort in 2001 over their counterpart in 1985 was bigger for younger cohorts than for older cohorts. In other words, today's younger generation is more leveraged today than their predecessors. They also were more likely to refinance, cash out home equity, or take a second mortgage. This may reflect a shift in attitude toward more current-period consumption as well as a greater acceptance of having mortgage debt by younger generations. We also found that the decision of the household to choose a rate-and-term refinance, cash-out refinance, or extract home equity through a second mortgage was related to the amount of the interest rate reduction and to real house value increases, and therefore was a rational response to market forces. Disparities exist between income, education, and racial groups as to the home equity value in a particular year and the extent of growth through the years. This was also confirmed by our regression results that isolate the contribution of each factor to equity values. Minority, especially black, and low-income are both negatively related to the home equity level. Furthermore, our aggregate leverage regression showed that, holding everything else equal, household heads with lower educational attainment, lower income, or who are African American have higher leverage. Our refinance study further showed that lower-income and African American families experience significant wealth reductions over time because of a failure to refinance at opportune moments. Because of these missed opportunities, these homeowners pay about 35,000 in additional interest payments over a thirty-year horizon. As a group, African American homeowners forgo 22 billion loss over thirty years.
Home ownership is touted as the "American Dream". It is credited with enhancing wealth, increasing civic pride, improving self-esteem, crime prevention, child development, and better educational outcomes, among other benefits. This paper does not dispute any of these claims. Instead, this study hypothesizes that crowding toward homeownership raises the price of homes above their fundamental value resulting in the purchase of a home becoming a contraindicative action. After setting the holding period to the average American’s tenure in a residence, renting (not buying) proves to be the superior investment strategy over most of the study period.
This study examines whether borrowers’ race and ethnicity affect subprime loan pricing after accounting for objective determinants, including credit scores and loan-to-value ratios. The results show that African-American and Latino borrowers are more likely to receive higher-rate subprime home loans than non-Latino white borrowers.
Home ownership increases the incentive to maintain property and neighborhood, as well as decreasing the outflow of rents from low-income zones. However, these benefits are not costless to homeowners. With a mortgage comes the possibility of default, the financial demands of maintenance, a reduction in alternate investment opportunities, an increased exposure to fluctuations in local economic conditions, and a drastic reduction in the liquidity of personal wealth. Recently, policy makers have sought to increase mortgage lending in traditionally underserved markets. In this paper we consider the effects of this policy in light of the risk and return of housing and the current tax treatment of the home mortgage deduction. We find housing to be a relatively poor asset class in which to invest the bulk of family wealth. Trends in housing suggest that a large percentage of homeowners who bought and sold within a five year horizon in the United States over the last twenty years lost money on the investment. Lowering the equity required to purchase a home does little to alleviate the problem. We show that the current tax code - if anything - encourages renting over buying and gentrification of low income housing markets. If the government wishes to encourage home ownership among low income families despite the risks, then we argue that government agencies should share information about the risk and return of home ownership with its citizens. In addition, a direct subsidy through a tax credit may be both warranted and necessary to achieve the desired result.
This article analyzes the performance of low-income and minority mortgages (LIMMs) from a large sample of fixed-rate conventional conforming mortgages. We find that low-income borrowers are less likely to prepay when it is optimal, whereas black and Hispanic borrowers prepay more slowly than other borrowers, regardless of the option's value. After controlling for equity, credit history and some other variables, LIMMs default slightly more frequently and have about the same loss severity as other loans. Our results suggest that, for most yield curve situations, differences in LIMM prepayment behavior have little effect on pricing. Copyright 2007 American Real Estate and Urban Economics Association
This study explores the financial value of homeownership for households in the 15% Federal tax bracket. Earlier studies concluded homeownership was only for households with high marginal tax rates, but they neglected how vacancy and turnover rates factor into rental prices. Principal innovations here include deriving long-run equilibrium rent-to-value ratios for the rental market and contrasting investor holding periods with lengths of household tenures. Tax regime simulations are performed for homeowner deductions and investor capital gains tax rates.