Capital Gains, Homeownership and Economic Inequality

Abstract

The paper examines the distribution of capital gains and the net benefits of homeownership in terms of the debate between Marxists and Weberians on how homeownership modifies class inequality. Capital gains and net benefits are measured using unit record data from valuation records of the 1980s and a survey carried out by the Australian Institute of Family Studies in 1991 of over 2500 families in Sydney and Melbourne. Higher socio-economic groups generally had significantly larger dollar gains than groups below them and, by this measure, homeownership adds to inequalities generated through the labour market. However, because they had commenced purchase with smaller deposits, the low socio-economic groups did as well or better than other groups when capital gains are expressed as a percentage return on deposits. Capital gains are one of the variables included in a measure of net housing benefits; an attempt to quantify all the major benefits and costs involved in purchase rather than renting. The net housing benefits accruing to different socio-economic groups since deregulation of finance markets are compared using survey data relating to the 1980s property boom, and estimates using the much lower rates of interest and capital gains in housing markets of the 1990s. Again, there is a strong association found between dollar benefits and socio-economic status. The paper concludes that, measured in dollar terms, the distribution of net housing benefits in Sydney and Melbourne has had a substantial class bias since deregulation, tending to create a more unequal society.