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Claims of Homeownership's Social Benefits Rise from the Grave

You might have thought all those studies linking homeownership to a slew of wondrous benefits died with the foreclosure crisis.

But they're not dead. Like zombies, they've come back to life, just in time for Halloween.

The authors of a 15-year-old study that suggested you might save your kids from teenage pregnancy by buying a house have doubled down on their findings. More on that research in a bit, but first, some important context.

Back in the heady days when A&E's "Flip This House" was competing against TLC's "Flip That House," studies touting the various benefits of homeownership were key tools for housing industry lobbyists. The industry was trying to persuade the government to increase subsidies for home purchases, and it found support in academic research, much of which the industry had itself funded.

According to an advocacy report from the National Association of Realtors that summarized many of the findings, homeowners are better citizens than renters, and they're less likely to go on welfare.

Homeownership, the report also found, is linked to less crime, greater social cohesion, and even better health and greater happiness. Sounds pretty sweet, right?

One of the studies cited was a 1997 paper by Richard Green, now a real estate professor at the University of Southern California, and Michelle White, who is currently an economics professor at the University of California, San Diego.

Their research paper, titled "Measuring the Benefits of Homeowning: Effects on Children," found that owning a home is associated with lower high-school drop-out rates and lower teen pregnancy rates.

"The rather surprising result of the paper is that homeowning by parents benefits their children, who are less likely than children of renters to drop out of high school or to have children as teenagers. Both effects are largest for children of low-income households," the researchers concluded.

The authors wrote that their findings offered "some justification" for government policies that favor homeownership, and they suggested that subsidies should be used to turn more renters into homeowners. (Green told me in an email that the authors did not receive grant money for the work.)

Once the housing bubble burst, the problems with this line of research became all too obvious.

Importantly, the mere fact that researchers found a correlation between homeownership and all kinds of more favorable outcomes did not prove that buying a house was the cause of those advantages.
After all, it could be that people who are responsible enough to save the cash necessary to buy a house are passing those same traits on to their children, and those traits, not the home purchase, are the cause of their kids' better outcomes. There could be other reasons, too.

Moreover, most of the studies were done at a time of rising home prices. Borrowing to buy a house carries some risk of foreclosure, and foreclosure brings a slew of negative consequences on the affected family. But as long as home prices were climbing, the risk of foreclosure wouldn't be as evident in the data.

So it's no surprise that over the last five years there hasn't been much new research on the ancillary benefits of homeownership. But last week, Richard Green and Michelle White, along with USC real estate professor Gary Painter, came out with a new study that defends and elaborates on their earlier work.

The paper, titled "Measuring the Benefits of Homeowning: Effects on Children Redux," finds once again that the kids of homeowners have lower dropout rates and lower teen birth rates than the children of renters.

The authors went further this time than in their earlier work – analyzing the outcomes for kids according to the size of their parents' down payment. And they found that making a down payment of any size is correlated with better outcomes for kids, but bigger down payments are not associated with better outcomes than smaller ones.

One problem with the results is that they rely on data that runs only until 2007, which is when the nationwide foreclosure crisis started. Doesn't it seem likely that adding data from the last five years might have affected the results?

To be fair to the authors, they were using the most recent information available, and they plan to update their findings with data that runs up to 2009.

Also, the authors did attempt to identify other variables that might explain the correlation between homeownership and improved outcomes for kids, and they didn't find any. And they are careful not to overstate their findings by claiming that homeownership definitely causes better outcomes for kids.

"Does buying a home make you a better person? No, but the discipline associated with saving for even a small down payment and subsequently managing a house is, on average, associated with the discipline needed to promote better outcomes for children," Green said in a news release announcing the study's findings.

The biggest problem I have with the research is not its methodology. Rather, it is the study's very existence.

Someone please remind me why we need another research paper showing a statistical correlation between homeownership and improved social outcomes.

We've already got a thick sheaf of similar studies, and as far as I can tell, their relatively narrow findings are not in much dispute, although their relevance to our nation's current plight certainly is. We've seen more than 4 million homes lost to foreclosure since 2007, which sure seems like a worthwhile research topic to me.

So why do we have this new study? I don't know the answer, but I can't help but wonder whether it has something to do with the interests of the people who paid for it.

The researchers received $40,000 in grant money from the Research Institute for Housing America, according to Green. The Research Institute for Housing America is an arm of the Mortgage Bankers Association, the Washington-based group that lobbies for greater access to homeownership. 

Like I said, watch out for zombies.

Kevin Wack is a reporter covering consumer finance for American Banker. The views expressed are his own.



(9) Comments



Comments (9)
JRGordonDC hits the nail on the head: "A foreclosure crisis caused by lousy, designed-to-fail products push-marketed to consumers due to Wall Street's insatiable appetite for risk has absolutely no relationship to whether or not homeownership is a good idea."

I'm as hostile to realtor lobby studies as the next guy, but there is too much evidence showing the benefits of home ownership - socially and to individuals. And if we don't trust studies most of us can look around for that evidence.

We don't need to fear responsible loans to the working class. The real danger is poorly regulated and predatory lending along with equally predadory securitization of bad loans passed off as good. We should keep that in mind as evidence of the resurgence of such practices starts to appear.
Posted by j.doe | Friday, November 02 2012 at 11:03AM ET
What is Housing Analyst talking about?? I have owned two houses and inherited two others and none have depreciated. Quite the contrary. Apart from the sociological issues, housing is a cornerstone of the nation's economy and culture. It is the principal way in which the middle class accumulates wealth. Except for the super rich, we all need to pay a significant amount each month for a place to live. We can pay that to a landlord (think the Donald or Leona Helmsley) and make him or her rich, or we can pay off a long term loan and after 20 or 30 years own our own house worth several hundred thousand dollars. No other investment is likely to provide such a payoff. Ever live in a stock? A house is also the urban equivalent of the family farm, the physical nexus of the family. A nation of renters paying a small class of very rich landlords for a place to live month by month from cradle to grave would be a very different place than the nation of landowners we have today. It is not hard to understand why home ownership has been a major public policy priority for the past 80 years, at least, and should continue, even if the teenager does get pregnant.
Posted by gsutton | Wednesday, October 31 2012 at 7:14PM ET
What hideous comments.

Encouraging wide swaths of the population to BORROW grossly inflated amounts for what is always is a depreciating asset is a bad idea, period. And here you all are championing for more of the same.

Did the thought ever occur to any of you that housing prices are grossly inflated?
Posted by Housing Analyst | Wednesday, October 31 2012 at 6:13PM ET
Owning a home is wonderful when you do not "bite more than you can chew." When people do not take into consideration their income vs the expenses of owning a house, that is when headaches and foreclosures can come. Our parents and grandparents worked and saved for their downpayemtns and their homes were their priorities. That is not the same concept young people have today. We want everything fast. Easy come, easy go.
Posted by MartaC | Wednesday, October 31 2012 at 4:54PM ET
I am in complete agreement with Mr. Wack. A sense of ownership, pride, and accomplishment only comes with earning the money and saving to buy a house. You cannot 'give' these characteristics to someone. Why would you take any pride in owning something you didn't work for? These characteristic are learned and passed down to our children
Posted by usbank | Wednesday, October 31 2012 at 2:19PM ET
Sustainable homeownership has benefits both for families and for neighborhoods. I agree that we should not have to prove this repeatedly, but good studies are always useful (I have not personally read the one you're reporting on). A foreclosure crisis caused by lousy, designed-to-fail products push-marketed to consumers due to Wall Street's insatiable appetite for risk has absolutely no relationship to whether or not homeownership is a good idea. If anything, the crisis means it's more urgent than ever to rebuild neighborhoods and help Americans rebuild their lives.
Posted by JRGordonDC | Wednesday, October 31 2012 at 1:47PM ET
The benefits of home ownership only accrue if the "owners" are able to afford the payment. Otherwise, every day is like having the sword of Damocles hanging over your head.
Posted by SEG NSFP | Wednesday, October 31 2012 at 1:46PM ET
Homeownership GOOD! Choking regulations BAD! End of story.
Posted by commobanker | Wednesday, October 31 2012 at 1:34PM ET
The various housing lobbies have pushed home ownership for decades, and academics have generally provided ex post justifications. Whether you own or rent hs virtually no externalities. Where you live and how you live does. Homeowners were traditionally more affluent.
Posted by kvillani | Wednesday, October 31 2012 at 1:32PM ET
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