Low-Income Homeownership: Examining the Unexamined Goal

PART 5. Socioeconomic Impacts of Homeownership

5 part Socioeconomic Impacts of Homeownership Owning a home and a piece of land to call your own is central to the American dream. Dictated by a unique American cultural imperative and relentlessly promoted by a complex web of public and private institutions built around housing and housing finance, homeownership enjoys a pivotal role in American culture. Historically, homeowners needed to enter the middle class before they could afford a house. In recent years, the growth of low down payment and flexible underwriting standards combined with explicit public policy goals, regulatory pressure, and an excellent economy to extend the mortgage market. Consequently , homeownership has reached into new segments of the population. The Clinton administration played an important role in this development by publicizing and setting high goals for homeownership rates. These goals explicitly assumed that homeowners do better in terms of financial and social outcomes than renters. Many also think of homeownership as a strategy to stabilize deteriorating or dangerous neighborhoods. How much of this drive for higher homeownership rates draws on evidence from solid research? This section examines the base of scholarly knowledge on how homeownership affects people, families, and communities. In addition, it presents provocative new looks at some of the more specific (and controversial) claims about what changes homeownership can bring about. 375 file06 ch13-16 pp375-478.qxd 7/5/2002 2:26 PM Page 375 The Social Benefits and Costs of Homeownership: A Critical Assessment of the Research A very thin research literature supports the many claims made for the social benefits of homeownership. William M. Rohe, Shannon Van Zandt, and George McCarthy assess the literature to see what we do and do not know about the social costs and benefits of homeownership. They show in their chapter that studies do support positive social effects associated with homeownership. Researchers have found that homeowners are more satisfied, more likely to participate in voluntary and political activities, and more committed to their neighborhoods than those who do not own their homes. However, the evidence for the social benefits of homeownership is not as conclusive as is often presented in public dialogue and debate. Much of the evidence supporting these findings does not carefully separate the effects of owning a home from the impact of earning more or having more education. Not controlling for these two influences may overstate the social benefits of homeownership. Rohe, Van Zandt, and McCarthy also argue that we have also paid insufficient attention to potential social costs associated with homeownership, particularly for lower-income households. Researchers have shown that homeowners are less mobile than renters. Reduced mobility makes it more difficult for a household to move in search of better employment opportunities. Furthermore, households that experience long-term job loss or unexpected medical costs may not be able to pay the bills. Although breaking a lease on a rental unit is problematic, defaulting on a mortgage is much more serious and thus more stressful and traumatic. Despite the relative lack of knowledge about the downside of homeownership , federal policy clearly and substantially favors homeownership over renting. Defenders of this policy tilt often justify their position with arguments that homeownership creates a better class of people and citizens. The next two chapters present new findings addressing the controversial question of whether a household’s tenure, by itself, can have an independent effect on people’s social and economic achievements and behavior. This argument is problematic to many low-income housing advocates. They believe that, in the decremental budgetary environment that has dominated national policy for the past twenty-five years, the overwhelming emphasis placed on federal support for homeownership has short-changed affordable rental housing programs. To many, such claims have an impact on distribution of the government’s investment in housing, and they also often implicitly stigmatize people who rent. These are legitimate strategic and political concerns, but a fundamental question remains: what if these claims are true? As Rohe, Van Zandt, and McCarthy point out, there is very little literature on these questions, and what research exists is often unable to disentangle cause and effect. For instance, does home376 socioeconomic impacts of homeownership file06 ch13-16 pp375-478.qxd 7/5/2002 2:26 PM Page 376 ownership encourage behavior that creates wealth, or do people with better chances at building wealth, ceteris paribus, tend to own homes? Does homeownership have an independent effect on children’s educational and behavioral...