Lower Homeownership Research Articles

Housing Policies in the United Kingdom, Switzerland, and the United States: Lessons Learned

We provide an analysis of the housing market and current housing policies in three developed countries: the United Kingdom (UK), Switzerland, and the United States (US). We focus on these three countries mainly due to the marked differences in their institutional settings. The UK is characterized by fiscal centralization and an extraordinarily rigid planning system. The consequences of this setting, which make housing supply extremely unresponsive to changes in house prices, are a high degree of urban containment, a severe housing affordability crisis, and a housing shortage, particularly for the young. The key UK policy, Help-to-Buy, which focuses on stimulating housing demand, fails to address the affordability crisis, because increasing demand only pushes up house prices further without expanding housing supply. Fiscal decentralization and a lax zoning system, both encouraging residential development and an extraordinarily low homeownership rate explain why Switzerland’s main political concerns are sprawl and rent stabilization. The country’s key policies aim to tackle these two concerns but they themselves have some important unintended consequences. The US is characterized by fiscal federalism and an enormous variation in the tightness of land use restrictiveness across metropolitan areas. The key policy concern across the country is homeownership attainment and the key policy to tackle this issue is the Mortgage Interest Deduction (MID). This policy backfires in prosperous and tightly land use regulated metropolitan areas — “superstar cities” — because in these places the policy-induced demand increase mainly pushes up house prices. The MID only increases homeownership attainment of higher-income households in metropolitan areas with lax land use regulation. The net effect of the policy on homeownership attainment across the country is essentially zero. We conclude that the assessment of housing policies crucially depends on the fiscal and regulatory environment in local housing markets. Policies that stimulate housing demand such as the MID or Help-to-Buy are doomed to fail in markets with tight regulation or otherwise tight supply.

The German housing system: fundamentally resilient?

The initial research question was: How can we explain the fact that the German housing system was seemingly unaffected by the financial crisis? The relative macro-economic stability of the German economy is part of the story, but the initial question led to a more fundamental analysis of why there had been no precrisis excesses in the German housing market. The longer term lack of volatility in Germany is just as in need of explanation as the excesses elsewhere. An important part of the explanation may be the particular tenure structure of the German housing market—which is characterized by a low homeownership rate and a large market share for private landlords. This structure was shaped over time by institutional development. In particular, mortgage finance systems and habits did not develop independently of that tenure structure. Equally that tenure structure arises in part from regulation and housing subsidy systems that do not favour homeownership.

A European Cross-Country Comparison of the Impact of Homeownership and Transaction Costs on Job Tenure

De Graaff T. and van Leuvensteijn M. A European cross-country comparison of the impact of homeownership and transaction costs on job tenure, Regional Studies. This paper looks at the impacts across European countries of homeownership and transaction costs on job tenure. The analysis is based on a representative household sample of fourteen European countries covering the period 1994–2001. These data are merged with country-specific transaction tax data and aggregate homeownership rates. Similar to previous microeconomic studies, the results indicate that homeownership reduces job mobility as well as the probability of becoming unemployed or economically inactive. It is found, however, that this effect is severely mitigated by two factors. First, it decreases when aggregate homeownership rates are higher. Thus, homeowners have larger job tenures, but more so in countries with low homeownership rates. Second, transaction costs on the housing market are positively associated with the probability of becoming unemployed.

Analyzing CRA Lending During the Tsunami in Subprime Lending and Foreclosure in the Philadelphia MSA

Until the onset of the financial meltdown, independent mortgage companies (IMCs) had begun to originate an increasing share of subprime loans, a high proportion of which went into foreclosure. In this study, we compare and contrast the characteristics of neighborhoods that have high proportions of loans made by Community Reinvestment Act (CRA)-regulated institutions with those that have high proportions made by IMCs. We find that IMC-dominated neighborhoods are characterized by high proportions of Blacks/African-Americans, low average family incomes and low nominal average family income increases, an old housing stock with inexpensive homes, a low homeownership rate, high vacancy rates, and a high proportion of high-cost loans. Based on t-tests and regression analyses, we find that areas dominated by IMCs are different from neighborhoods dominated by CRA Lenders and that the proportion of people of color helps explain foreclosure rates.

Public Housing and Life Chances: Insights from a Longitudinal Study

The lack of affordable housing for low-income families with children in Australia is an issue of considerable concern in a context where access to public housing has become quite restricted and where home ownership remains the dream. The longitudinal Life Chances Study provides data to explore housing histories of 137 families with young children over an 18-year period, highlighting the lower home ownership of low-income families over time. The article then considers the housing history of 20 of the families who lived in the same high-rise public housing estate at the start of the study. Three case studies illustrate their housing pathways. While families had both positive and negative experiences in public housing, public housing provided an affordable and secure base while they established themselves in employment and saved to purchase homes. The article confirms the importance of access to public housing for low-income families.

Trajectories of Multidimensional Neighbourhood Quality of Life Change

This paper provides an empirical analysis of the multidimensional, spatio-temporal quality of life (QoL) trends followed by neighbourhoods in Charlotte, NC, between 2000 and 2010. Employing a combined geocomputational and visual technique based on the self-organising map, the study addresses which types of neighbourhood experienced the most change or stability, where (in attribute and geographical spaces) did neighbourhoods that began the decade with a particular set of characteristics evolve to, and where did neighbourhoods that concluded the decade transition from? Results indicate that the highest QoL neighbourhoods were most stable, while those with lower homeownership, closer to the city centre, exhibited the sharpest longitudinal trajectories. Lower-income neighbourhoods are found to be heterogeneous in terms of their social problems, dividing between high crime concentrations and youth-related social problems. An exchange of these social issues over time is observed as well as a geographical spread of crime to middle-ring suburbs.

Affordability and Germany's low homeownership rate

PurposeRelative to comparable industrialized countries, Germany stands out in terms of its low homeownership rate (43 percent). For Germany, it is unknown so far to what extent the low rate of homeownership can be related to housing being unaffordable. One reason for the lack of evidence is the apparent lack of data. The purpose of this paper is to fill this gap.Design/methodology/approachBased on a regional dataset of 3.9 million asking prices of housing units collected by a real estate listing engine, the paper applies internationally established affordability concepts to the German housing market. The authors then run a number of cross‐section regressions at the level of the 16 German federal states, using the affordability measures as explanatory variables of the rate of homeownership.FindingsThe results show that the average German household would have to sacrifice a large part of its non‐housing consumption to afford homeownership, especially of single‐family homes. As the regional analysis reveals, certain types of household can even be considered excluded from the ownership market in some particularly unaffordable states with cost burdens of over 50 percent, such as Bavaria. The cross‐section regression results for the 16 federal states affirm the importance of affordability as a determinant of the homeownership rate.Research limitations/implicationsThe official data on ownership rates are rather spotty over time and only available for a single year (2006) for the time frame that is considered for the affordability analysis (2005‐2010). Given the data limitations, the regression analysis has to be confined to a single cross section least squares regression for 2006. The authors are aware that to obtain truly convincing results, it would be necessary to capture the development of ownership rates in different localities in Germany, such as the 16 federal states, over time and to check to what extent the affordability measures can explain any of the variation in ownership rates in a panel data framework with fixed effects for federal states and time. However, the authors feel that the regression results may serve as a starting point; they are better than a set of simple correlations, even if they constitute not a conclusive causal analysis.Practical implicationsAny public policy initiative to raise Germany's homeownership rate will have to address the question of how to make housing more affordable. The recent elimination of homeowner subsidies is working in exactly the opposite direction.Originality/valueThe affordability approach used is technically not new or challenging, but it offers a basis for comparison that has been conspicuously lacking so far for the fourth largest economy of the world. By applying affordability concepts that are well accepted and in use internationally, the authors believe that they can provide at least some suggestive evidence that can further spur research into the affordability issue. While the authors do not break new methodological ground with their paper, they do provide a basis of comparison for policy discussion and for further research. Germany provides a unique environment for affordability research, due to its reunification history, observations from which may thus yield insights valuable to the international research community.

Cohort progress toward household formation and homeownership: young immigrant cohorts in Los Angeles and Toronto compared

As immigrants adapt to their new country, they experience both increased access to homeownership and an increase in independent household formation. This paper examines residential assimilation, as measured by homeownership and household formation, among five young immigrant cohorts in Los Angeles and Toronto over a five-year period in the early 2000s. Results show that while differences between groups are evident already at the beginning of the study period, residential assimilation occurs for all groups over time, relative to the native-born. This assimilation, however, seems to occur differently by group; the Chinese, for example, attain high homeownership rates by creating relatively few households, whereas black immigrants form many more households but much lower homeownership rates, over time. Comparing across countries, immigrants consistently have lower rates of household formation and mostly higher homeownership levels in Toronto than they do in Los Angeles.

Child obesity associated with social disadvantage of children’s neighborhoods

Evidence suggests variability in adult obesity risk at a small-scale geographic area is associated with differences in neighborhood socioeconomic status (SES). However, the extent to which geographic variability in child obesity is associated with neighborhood SES is unknown. The objective of this paper was to estimate risk of child obesity associated with multiple census tract SES measures and race within a large urban U.S. county. Height, weight, age, sex, medical insurance type and census tract residence were obtained for 6-18 year old children (n=8616) who received medical care at a health plan in King County, Washington, in 2006. Spatial analyses examined the individual risk of obesity (BMI > or = 95th percentile) with 2000 US census tract measures of median household income, home ownership, adult female education level, single parent households, and race as predictors. Conditional autoregressive regression models that incorporated adjacent census tracts (spatial autocorrelation) were applied to each census tract variable, adjusting for individual variables. We found that in adjusted spatial models, child obesity risk was significantly associated with each census tract variable in the expected direction: lower household income, lower home ownership, and for each 10% increase in less educated women, and single parent households, as well as non-white residents. In a spatial model including all variables, the SES/race variables explained approximately 24% of geographic variability in child obesity. Results indicated that living in census tracts with social disadvantage defined by multiple different measures was associated with child obesity among insured children in a large U.S. urban county. These results contribute new information on relationships between broader social and economic context and child obesity risk using robust spatial analyses.

Why is the German Homeownership Rate so Low?

The comparatively low homeownership rate in Germany is often referred to as a weakness of the German housing market. As it turns out, the situation in Germany is primarily due to four factors. First, rental housing makes up a larger share of the market because of an extensive social housing sector. The high quality standard of social housing and the fact that private investors were included in the subsidisation scheme from the beginning laid the foundation for a large private rental housing market. Second, homeowners in Germany did not benefit from the same high subsidies as in countries such as Spain or the Netherlands. Third, the German rental housing market was not rendered inoperative by excessive interventions in rents, as was the case in countries such as Spain and the UK. Finally, German house prices remained stable over a long period of time. Therefore, in view of these results, judgements on Germany's housing market should be revised.

EXITS FROM HOMEOWNERSHIP: THE EFFECTS OF RACE, ETHNICITY, AND INCOME*

ABSTRACT This paper examines the extent to which populations experiencing low homeownership rates in the U.S. also experience high homeownership exit rates. We determine whether low‐income Hispanic and black households that achieve homeownership are as likely as white and high‐income households to sustain it. Using the Panel Study of Income Dynamics spanning the years 1970–2005, we find that low‐income homeowners consistently have higher homeownership exit rates, Hispanic households have higher raw exit rates prior to but not subsequent to 1997, and a black/white sustainability gap appears to arise post‐1997.

Is Homeownership the Answer? Housing Tenure and Indigenous Australians in Remote (and Settled) Areas

This paper examines the relevance of recently floated policy ideas for extending homeownership to remote Aboriginal Australians. It argues that while the housing tenure system in more densely settled Australia is dominated by homeownership, this is not, and cannot realistically be expected to be, the case in remote areas. The paper uses data from the 2001 Census, organized by remoteness geography, to demonstrate the different character of the housing tenure system in remote Australia. The paper argues that homeownership in remote Aboriginal communities is a somewhat unrealistic policy goal, given the underlying income and employment status of Indigenous people in these communities. The paper also argues that there are better measures of Indigenous housing need and disadvantage in Australia than low homeownership rates. It briefly reports on one past failed experiment in Queensland to introduce homeownership to a remote Aboriginal community.

House Price Developments in Europe: A Comparison

House prices in Europe have shown diverging trends, and this paper seeks to explain these differences by analyzing three groups of countries: the fast lane, the average performers, and the slow movers. Price movements in the first two groups are found to be driven mostly by income and trends in user costs, and housing markets in these countries seem relatively more susceptible to adverse developments in fundamentals. Real house price declines among the slow movers are harder to explain, although ample supply, low home ownership, and less complete mortgage markets are likely factors. The impact of macroeconomic, prudential and structural policies on housing markets can be large and should be a factor in policy decisions.

House Price Developments in Europe: A Comparison

House prices in Europe have shown diverging trends, and this paper seeks to explain these differences by analyzing three groups of countries: the fast lane, the average performers, and the slow movers. Price movements in the first two groups are found to be driven mostly by income and trends in user costs, and housing markets in these countries seem relatively more susceptible to adverse developments in fundamentals. Real house price declines among the slow movers are harder to explain, although ample supply, low home ownership, and less complete mortgage markets are likely factors. The impact of macroeconomic, prudential and structural policies on housing markets can be large and should be a factor in policy decisions.

Family Attachment and the Decision to Move in Blacks and Whites

Blacks have lower geographical mobility rates than whites even though blacks have several characteristics that are usually associated with high mobility rates such as low home ownership rate, high unemployment rate, and low marriage rate. This apparent contradiction can be explained by the role of the extended family. We test the relevance of the extended family in explaining mobility by using a proxy that we construct using data from PSID. Our results are robust to different specifications and estimation techniques.

Low Cost Home Ownership Initiatives in the UK

In common with many other countries, the UK has treated owner occupation favourably in comparison with other tenures in terms of tax and subsidy. However, the UK is distinctive in having encouraged the large-scale transfer of dwellings from the public rented sector to home ownership and in having developed a variety of low cost home ownership (LCHO) mechanisms to assist people at the margins into owner occupation. This paper evaluates these LCHO initiatives, considering value for money, sustainability and potential demand. Looking to the future, we see government policy and the level of demand as the most important determinants of the role of LCHO and discuss influences on demand and pointers to government policy.

A new model of neighborhood change: Reconsidering the role of white flight

New Orleans, a highly segregated city with low homeownership, experienced a tremendous number of housing foreclosures between 1985 and 1990. This study highlights the process and impact of foreclosure in the urban housing market, which contributes to an understanding of their impact on the spatial structure of the city. Two aspects of foreclosure are examined: the differential impacts of foreclosure on low‐income and African‐American householders and changes in socioeconomic conditions (neighborhood change and the spatial structure of the city) resulting from foreclosure. Conventional wisdom holds that urban neighborhood transformation is driven largely by white flight. The data presented in this article suggest a counterhypoth‐esis. Middle‐income professional whites employed in businesses impacted by recession who had recently bought housing with high loan‐to‐value ratios were forced to sell or have their houses foreclosed upon. The depressed market, in turn, made such housing affordable to middle‐class blacks interested in homeownership. Thus, black economic opportunity, rather than white flight, dramatically transformed the racial composition of many New Orleans East neighborhoods.

Racial Differences in Home Ownership and Home Equity Among Preretirement-Aged Households

The problem of housing market discrimination and racial disparities in mortgage lending has taken on a new level of urgency (Blacks, Hispanics Remain Most Likely to Be Denied Home Loans, 1992; Brenner, 1992; Zuckoff, 1992). Researchers and scholars, as well as federal officials, have begun to reexamine the underlying structures of mortgage and housing markets to understand the persistence of racial gaps in lending (Barefoot, 1992; Boston Federal Reserve, 1992; Myers & Chan, 1995). One particularly disturbing observation is that even during times when racial gaps in mortgage lending should have been narrowing — such as in 1992 when interest rates began an unprecedented nosedive below double-digit rates — the racial gaps persisted (Myers, 1994). Few minority individuals refinanced their loans during this period, even though loan refinancings became the most frequent form of mortgage loan during the period (Myers, 1994). Thus, not only were minority individuals less likely to obtain refinancings when they applied, they were less likely to apply. At least for middle-aged borrowers, the impact could be high debt levels carried into their retirement years. These high debt levels, along with low home ownership rates, may help explain the widely cited evidence of staggering net worth gaps between blacks and whites in America (Smith, 1993).

Immigrant Characteristics and Hispanic-Anglo Housing Inequality

This paper seeks to explain why Hispanic households in the United States live in housing markedly inferior to Anglos'. I argue that immigrant characteristics of Hispanic households and the metropolitan areas in which Hispanics live play important roles in determining such inequality in the housing market. Empirical analyses of homeownership, household crowding, and housing costs demonstrate that immigration plays a role in explaining relatively low homeownership and high household crowding for each of four large Hispanic populations (Mexicans, Puerto Ricans, Cubans, and other Hispanics). The role of immigrant characteristics in determining housing costs is much weaker.

Monitoring low cost home ownership initiatives: A longitudinal analysis of housing market trends within the privatised areas of four council‐built estates in Scotland

Abstract This paper is concerned with monitoring the longer‐term housing market trends within the privatised areas of four local authority housing estates on the periphery of major Scottish cities. The study areas in Edinburgh, Glasgow and Dundee were the subject of disposal initiatives to promote low‐cost home ownership in the mid‐to‐late 1980s. The analysis focuses mainly upon trends in mortgage possession and house price appreciation, based upon information obtained from the Register of Sasines and the Land Register. The results provide specific evidence of high levels of mortgage possession among initial purchasers as well as low rates of capital appreciation in respect of property values. In general, the findings point to the need for caution in the expansion of low‐cost home ownership initiatives, effective counselling to prospective buyers at the time of purchase, and provision of intensive support once the household's financial difficulties have begun to mount.