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Measuring the external benefits of homeownership
Institution:2. Department of Finance, Stern School of Business, New York University, NY, USA;1. Harvard University, Joint Center for Housing Studies, 1 Bow Street, Suite 400, Cambridge, MA 02138, USA;2. University of Southern California, Sol Price School of Public Policy, 650 Childs Way, Los Angeles, CA 90089, USA;3. University of Southern California, Leonard D. Schaeffer Center for Health Policy & Economics, 635 Downey Way, Los Angeles, CA 90089, USA;1. University of Connecticut, Center for Real Estate and Urban Economic Studies, School of Business Storrs, CT 06269-1041, USA;2. Maxwell Advisory Board Professor of Economics, Department of Economics and Center for Policy Research, Syracuse University, Syracuse, NY 13244-1020, USA;1. University of Göttingen, Department of Economics, Platz der Göttinger Sieben 3, Göttingen 37073, Germany;2. Aarhus University, Department of Economics and Business Economics, Fuglesangs Allé 4, Aarhus V 8210, Denmark
Abstract:The subsidization of homeownership is justified on efficiency grounds only to the extent that it provides benefits to people other than the homeowner. We use the clustered neighborhoods subsample in the American Housing Survey to measure that benefit in the form of higher housing prices in neighborhoods with higher ownership rates (and lower vacancies). We attempt to account for unobservable neighborhood and house attributes that may be correlated with occupancy and ownership through instrumental variables, switching regressions and panel methods. Estimates indicate that a housing transition from renting to owning creates approximately $1300 in measured benefits.
Keywords:Homeownership  External effects
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