Alternative measures of homeownership gaps across segregated neighborhoods

The dramatic rise in the U.S. homeownership rate from 64% in 1996 to almost 70% in 2005 has prompted increased attention to the relation between homeownership and demographic characteristics of households. The recent rise and sharp decline of subprime lending will likely spur further interest in homeownership gaps. Statistical analysis of these differences or “gaps” in homeownership between white and minority households has evolved into a highly stylized comparison of differences in homeownership at the mean or the conditional mean. This study implements a quantile decomposition technique that identifies the unexplained portion of the gap not only at the mean, but at every percentile of the homeownership distribution. Results suggest that differences in homeownership gaps at the mean reflect a combination of small differences at the upper end and much larger gaps at the lowest end of the distribution of homeowners. This study also adds credit history to the factors that are used to explain homeownership gaps.     

The Limits of Homeownership: Racial Capitalism,Black Wealth,and the Appreciation Gap in Atlanta

In the wake of the 2007–08 housing crash, the Black–white wealth gap reached a staggering 20 to 1. Since then, a growing chorus of influential voices has proposed measures to increase the Black homeownership rate as a means to narrow the gap. Others, however, have argued that the uneven racial geography of home price appreciation necessarily restricts the degree to which Black households, in the aggregate, can build wealth via homeownership. We aim to contribute to these debates by theorizing a racial appreciation gap as a central feature of urban housing markets under racial capitalism, and analyzing how neighborhood racial and income characteristics have structured home price appreciation from before the height of the housing boom (2000–03) to its post-crisis recovery (2014–16). Focusing on the two counties that encompass Atlanta, Georgia, USA—an area famous for Black prosperity—we find that a neighborhood's racial composition has a more salient impact on home price change than its income. Results indicate that when a place is marked as Black, this may itself inhibit home price appreciation, suggesting that an enduring racial appreciation gap may limit the potential for Black homeownership to substantively narrow the racial wealth gap.     

Explaining the route to owner-occupation: A transatlantic comparison

This paper compares the transition of young adults from renting to first-time homeownership in Britain and the U.S. By adopting a common theoretical and methodological framework, we identify behavioural similarities and differences in transitions in the two countries. We find that the higher ownership rates among British young adults are caused by quicker transitions and our study sheds light on which factors contribute to this difference. We use British and U.S. longitudinal data sets for the analysis and a relative risk Cox hazard model in the empirical work. Although there are behavioural similarities in attaining first-time homeownership with regard to the demographic and housing market variables, there are substantial differences in the two populations’ responses to income and wealth, where we find that young adults’ transitions to homeownership in Britain are more responsive.     

A Note on the Benefits of Homeownership

This brief note adds to recent work that attempts to identify externalities associated with homeownership. The results suggest that some of the homeownership effect found by Green and White is driven by family characteristics associated with homeownership, especially residential stability. However, as much as homeownership increases residential stability, it appears to be correlated with higher school attainment. Attempts to control for endogeneity cannot eliminate this finding.     

The social and private micro-level consequences of homeownership

This paper reviews the literature that describes the micro-level economic and social consequences of homeownership. We adopt an interdisciplinary approach and include studies from economics, sociology, geography, political science, psychology, and other disciplines. Our focus is on the set of consequences of homeownership in developed countries. Our list of potential outcomes of homeownership includes the impact on household wealth and portfolio choice, mobility, labor force participation, urban structure and segregation, home maintenance, political and social activities, health, demographics, self-esteem, and child outcomes. There is substantial evidence that homeownership has important effects on some household behaviors and outcomes. However, we find that much of the past 30-year's literature on consequences of homeowning is deficient from a theoretical or econometric perspective. We suggest solutions and identify research gaps present in the literature.     

Homeownership in the immigrant population

This paper analyzes the determinants of homeownership in immigrant households over the 1980–2000 period. The study finds that immigrants have lower homeownership rates than natives and that the homeownership gap widened significantly during that period. The differential location decisions of immigrant and native households, as well as the changing national origin mix of the immigrant population, helps explain much of the homeownership gap. The evidence also indicates that the growth of ethnic enclaves in major American cities could become an important factor in increasing immigrant demand for owner-occupied housing in many metropolitan areas.     

Do homeowners achieve more household wealth in the long run?

Despite the public’s faith in homeownership as a vehicle for wealth creation, there are surprisingly few empirical studies of the independent impact of homeownership and its duration on household wealth accumulation. This paper provides the first empirical evidence that homeownership, after controlling for other drivers of wealth accumulation, is positively and significantly associated with wealth accumulation over time. Using the Panel Survey of Income Dynamics, it examines the influence of housing tenure choices between 1989 and 2001 on household net wealth levels in 2001 after controlling for initial wealth in 1989, location, income, education, and other family and personal characteristics that might influence the rate of wealth accumulation. Importantly, the models used also control for the tendency of households to accumulate wealth between 1984 and 1989 (five years prior to the studied period). This approach is used to address the possibility that an unobserved variable—the propensity to save or accumulate wealth—may be associated with both the probability and duration of homeownership and the rate of wealth accumulation. All else equal, those who owned homes and owned for longer periods of time had significantly higher household net wealth by 2001. These results are compelling because house price appreciation over the period was near its long-run average while stock gains were above and real rent increases below their long-run averages. Hence, the findings are suggestive of a positive influence of ownership over long periods on net wealth, even during a period when alternative investments produced higher than normal returns and rents grew slowly. This is especially important because the overwhelmingly majority of households do not sell their homes shortly after buying them. In our sample, those who became owners typically owned for 7 years. Furthermore, most households that bought during a period of declining real home values in the early 1990s continued to own their homes for at least eight years and came out well ahead of those who did not own.     

Intrametropolitan migration: A simultaneous model of employment and residential location of white and black households

This study explores the relationship between the home and job location of the household within a metropolitan area. The model is an extension of the Alonso-Muth framework and allows the household to simultaneously choose its residential and employment location, monthly rent, number of rooms and the type of structure of the dwelling unit, so as to maximize its utility subject to the budget constraint.The data base is the Home Interview Survey conducted in 1965 by the (San Francisco) Bay Area Transportation Study Commission. The coefficients in the simultaneous model are estimated by two-stage least squares. The cross-section sample is stratified by tenure into renters and homeowners; by race into black and white households; and further by position in the life-cycle.The results of the location equations reveal that both the home and job location are responsive to each other which implies that the decentralization of jobs will result in the decentralization of residences for black households. The results of the housing equations imply that black and white households have almost identical elasticity of demand for housing. There is very slight evidence of price discrimination against black households. However, there is evidence that black households do face a geographical segregated market for rental housing.The results of this study argue that the decentralization of population is not due solely to rising incomes and will continue as long as industry decentralizes. Furthermore, governmental policies of increasing the income of central city residents, through subsidies to employers to locate in the central city will have a strong effect: inducing those residents to remain in or move into the central city. Thus, a policy that is meant to alleviate the plight of the city center may only result in strengthening the racial and income split between the suburb and the central city inhabitants.     

A model of residential change and neighborhood tipping

This paper applies the theory of probabilistic consumer demand to an analysis of residential change at the urban neighborhood scale. By developing the profit maximizing pricing behavior of housing suppliers, it is shown that neighborhood transitions from high income to low income and from white to black can be explained on purely economic grounds without involving prejudicial preferences. The analytical model explains two types of transition. In the first, a neighborhood's social mix changes gradually in response to gradual exogenous changes. In the second, a neighborhood “tips” suddenly in response to similar exogenous changes. The two transitions can occur depending on the characteristics of the demand functions for the two competing groups.     

Catching up to girls: Understanding the gender imbalance in educational attainment within race

We estimate a sequential model of schooling to assess the major contributing factors to the large gender imbalance in educational attainment within racial groups. First, we find that differences between males and females in measures of early behavior account for the majority of the gender gap for each racial group. Second, we show that black males have the largest response to improvements in family background characteristics, such that equalizing the distribution of family background characteristics for black and white youths reduces the gender gap in college enrollment among black youth by 50%.     

Skill-biased technological change and homeownership

In the United States, the residential housing market went through important changes over the period from the 1970s to the mid-1990s. Although the aggregate homeownership rate was relatively stable during that period, the distribution of homeownership rates by age changed in remarkable ways. While younger households saw substantial declines in homeownership rates, the opposite happened for older households. In this paper, we argue that the skill-biased technological change (SBTC) that began during the 1970s has been an important factor behind the observed change in the distribution of homeownership rates by age. We build a life cycle model in which skills are accumulated on-the-job through experience: learning by doing. Early in life, households have lower levels of skills and therefore lower earnings. SBTC increases the returns to skill, widening the wage gap between young and old ages. As a consequence, it takes more time for young households to become homeowners given frictions in financial markets (e.g. downpayment requirements) and housing markets (e.g. large and indivisible houses), in line with consumption smoothing behavior. On the other hand, older households that could not afford a house before may now become homeowners, given higher returns to skill. Our analysis confirms this conjecture, namely, that SBTC shifts the distribution of homeownership from the young to the old.     

Are Suburban Firms More Likely to Discriminate against African-Americans?

This paper assesses whether African-Americans are more likely to experience employment discrimination in the suburbs relative to the central city. We compare central city–suburban differences in racial hiring outcomes for firms where whites are in charge of hiring to the comparable difference for firms where blacks are in charge of hiring. Both suburban black and white employers hire fewer blacks than their central-city counterparts. This geographic gap among black employers is at least as large as that of white employers. Assuming no discrimination by black employers in any location, this implies that the probability of experiencing discrimination does not vary over space. Black firms, however, are substantially more likely to hire black workers regardless of location.     

Homeownership, wealth accumulation and income status

This paper examines the extent to which homeownership had an independent effect on the ability of low- and moderate-income (LMI) households to accumulate wealth during the mid-to-late 1990s. Using household data from the PSID, we generate a panel of households whose homeownership we observe over a 15 year period and whose wealth accumulation we observe at three points in time: 1994, 1999 and 2001. We investigate the extent to which homeownership has an independent impact on the wealth accumulation of LMI households, controlling for a host of other variables and unobserved heterogeneity. Accounting for the skewed nature of the wealth distribution, we find that each additional year of homeownership increases total net wealth by $13.7 K on average for the full sample. Interacting income status with years of homeownership indicates that the impact of homeownership varies by income status, with each additional year of homeownership being associated with $15 K more in wealth holdings for high-income households and roughly $6 to 10 K more in wealth holdings for LMI households.     

Tiebout choice and residential segregation by race in US metropolitan areas, 1980–2000

This article examines the link between local government fragmentation, or “Tiebout choice,” and segregation between black and white residents. As suggested by Tiebout [Tiebout, C., 1956. A pure theory of local public expenditures. Journal of Political Economy 64, 416–424.], fragmented local governance structures may encourage households to vote with their feet and sort into communities based on their willingness to pay for local public services. This outcome has been well documented. The nuance explored here is that, if the demand for local public services varies by race or if households have preferences for neighbors with specific racial characteristics, local government fragmentation may foster an increase in residential segregation by race across neighborhoods and jurisdictions. Results from metropolitan-level regressions suggest that increased Tiebout choice is associated with increases in black–white residential segregation within US metropolitan areas. Comparable results are obtained from household-level estimates, where the black racial composition of a household's census tract of residence is regressed on household-level controls and racially stratified measures of Tiebout choice. Results from both approaches suggest that a 10% increase in Tiebout choice would increase neighborhood segregation by no more than 1%, while segregation across jurisdictions would increase by between 4% and 7%.     

The homeownership decision of female-headed households

The homeownership rate of female heads of household is substantially lower than the rate for married women. A number of factors could account for this observation including differences in income and its sources, wealth, demographic characteristics, and the relative price of homeownership. We identify the impact of these factors and find income and the cost of owning relative to renting to be most important. Analysis of changes in female ownership rates over a 10-year period reveals the impact of the Equal Credit Opportunity Act which eased access to the mortgage market. We find evidence that ECOA raised the probability of homeownership for all women. However, much of the difference in ownership rates between married and unmarried women remains unexplained, especially for high income households.     

Does credit quality matter for homeownership?

While micro-level household data on wealth and income are available for assessing income- and wealth-based constraints to homeownership, lack of data on household credit ratings has precluded evaluation of credit quality as a potential barrier to homeownership. The study, for the first time, measures the relative importance of credit-, income-, and wealth-based constraints and estimates how the effects of these constraints have evolved over the past decade. The results show that financing constraints continue to have an important impact on potential homebuyers. The wealth constraint has the largest impact, although its importance declined substantially during the 1990s. Credit quality based constraints have become more important barriers to homeownership during the 1990s, mostly reflecting an increase in the number of households with impaired credit quality. Thus, both wealth and credit constraints persist as barriers to the attainment of homeownership.     

Commuting distances in a household location choice model with amenities

Observed commuting distances generally exceed those predicted by standard models of household location choice. This paper develops a model with locational amenities and two job centers. It is shown that differences in household preferences for amenities can lead to various types of residential location patterns, some of which result in higher average commuting distances in the city.     

What If Immigrants Had Not Migrated?

A bstract .   Despite strong theoretical arguments and models about international migration, very few empirical studies rigorously test these arguments and models. The purpose of the present study is to analyze determinants and consequences for international migration, focusing particularly on the returns to post-hoc international migration. The present study compares residential well-being of Korean international migrants in the United States with that of their hypothetical well-being if they had not migrated. Our suggested models of the selectivity corrected returns to various characteristics for immigrants and nonimmigrants enable us to estimate the "opportunity well-being" of individuals and households; that is, the well-being of immigrants-had-they-stayed and of nonimmigrants-if-they-had-immigrated. The data for our analyses are drawn from the 1990 Korea Census Data and the Public Use Microdata Samples (PUMS) of the 1990 U.S. Census. In either case of migrants-had-they-stayed or of nonimmigrants-had-they-migrated, international migration to the United States has a significant and positive effect on the probability of homeownership, especially for women. The results show that the predicted probability of homeownership attainment increases as a result of migration by 15 percent to 16 percent for women and by 8 percent for men. The study concludes that migrating to the United States offers better opportunities for homeownership than staying in Korea does, particularly for women.     

A silver lining to white flight? White suburbanization and African–American homeownership, 1940–1980

Between 1940 and 1980, the homeownership rate among metropolitan African–American households increased by 27 percentage points. Nearly three-quarters of this increase occurred in central cities. We show that rising black homeownership in central cities was facilitated by the movement of white households to the suburban ring, which reduced the price of urban housing units conducive to owner-occupancy. Our OLS and IV estimates imply that 26 percent of the national increase in black homeownership over the period is explained by white suburbanization.     

Housing tenure and labor market impacts: The search goes on

We develop two search-theoretic models emphasizing firm entry to examine the Oswald hypothesis, the idea that homeownership is linked to inferior labor market outcomes, and compare their predictions to three extant theories. The five models have surprisingly different predictions about the labor market at both the aggregate and micro levels. Using a suitable instrumental variable strategy, we estimate both micro and aggregate level regression models of wages and unemployment and compare the estimates to those predictions. We find that while homeowners are less likely to be unemployed, they also have lower wages, all else equal, compared to renters. In addition, higher regional homeownership rates are associated with a greater probability of individual worker unemployment and higher wages. The outcome of a horserace between our new search-theoretic models is mixed—the wage-posting model predicts observed unemployment impacts while a bargaining variant does a better job explaining observed wages and aggregate labor market outcomes. Overall, we conclude that firm behavior is important for understanding the labor market impacts of homeownership. Because this is the case, regional homeownership rates are not good instruments for individual tenure choice in empirical work. And while individual homeowners may have inferior labor market outcomes as compared to renters, from the viewpoint of society, higher homeownership rates may result in greater job creation and overall production, among other benefits.