Historically, homeownership has been considered an effective mechanism for wealth creation, especially for low- and moderate-income and minority households. Even with a modest down payment, homeowners can accumulate wealth through the forced savings that result from the periodic payments on fixed-rate mortgages and from rising house prices over time.
Sadly, the same cannot be said for families who used subprime mortgages to purchase homes in the run-up to the financial crisis that took place during the 2008–2010 Great Recession. Subprime mortgage loans hurt entire communities, not just the low income borrowers who were the most directly affected.
In the wake of the Great Recession, a central policy question remains: If homeownership is not guaranteed to create wealth, are there other reasons for promoting it? Is there a rationale for supporting and extending homeownership beyond whatever financial benefits it may convey?
Unfortunately, the literature on the social impacts of homeownership has not been able to provide a definitive answer to this question. One reason for this is that the social outcomes associated with homeownership can be both positive and negative. Positive aspects include those associated with greater individual benefits and broader civic and community participation. Negative aspects include the homeownership-based stratification that contributes to politics of exclusion.
This exclusion leads to and is reinforced by the enactment of exclusionary zoning laws and policies that marginalize low-income households to neighborhoods with few opportunities. Moreover, questions remain about which methodological strategies should be used. To what extent have past findings about homeownership been the result of methodological considerations such as selection bias? Past research on the effects of homeownership has generally failed to account for the self-selectivity of homeowners: People choose whether to buy or rent a home, and it is likely that this choice stems from a set of systematic differences between owners and renters. The failure to control for self-selection into homeownership has led to bias in analyses comparing social outcomes for homeowners and renters.
In our book, A Place Called Home: The Social Dimensions of Homeownership, we address the challenge of selection bias, especially as it relates to the nonfinancial dimensions of homeownership, which are our central focus. More narrowly, we examined rigorously the positive social dimensions associated with homeownership.
We uncovered three individual-level benefits of homeownership. First, owning a home is associated with a reduced risk of physical health problems, though financial hardship increases that risk. Homeowners experiencing financial hardship are actually at greater risk for physical health problems than their renting counterparts. Second, we found that although both low- and moderate-income renters and owners experienced similar levels of financial hardship during the Great Recession, the homeowners reported feeling more satisfied with their financial lives. Third, we found that homeownership is linked with positive mental health outcomes through the mediating factor of sense of control.
Our research also uncovered four broader-reaching effects of homeownership; these also occur at the individual level, but their effects could be felt at the local neighborhood and community levels.
First, we found that homeowners are more likely than renters to have voted in a recent local election, and that homeowners in disadvantaged neighborhoods are even more likely to vote than owners in other areas. Second, we found that involvement in neighborhood groups increased substantially after renters became homeowners. Third, we found that homeowners have more overall social capital resources and more neighborhood-based social capital resources than renters.
Finally, we found that homeownership is associated with a higher sense of community and a greater willingness to fix neighborhood problems. These two elements form collective efficacy, which is known to reduce violent crime. Our analysis shows that through collective efficacy, homeownership is negatively associated with perceiving crime as a major neighborhood problem.
We examined possible pathways, or mechanisms, through which the benefits of homeownership are transmitted. These include one psychological mechanism (perceived control), one sociological (social identity), one financial (user cost of housing), and one having to do with residential stability.
We found that sense of control was a significant factor in the health outcomes examined: An elevated sense of control explains why homeowners have a reduced risk for both physical and mental health problems, and better overall health.
We also found that residential stability is a key mechanism linking homeownership and social outcomes: The longer people live in the same house, the more likely they are to vote in local elections, form social ties in their neighborhoods, and become engaged in their community.
With regard to financial interests, we found that the user cost of housing is not significant in any of the models. Additionally, we examined dependencies, or whether certain effects were altered by factors such as home equity. We found that home equity does, indeed, play a role in those models that examine health outcomes. Specifically, the homeownership effect on health depends on higher home equity; it is no longer associated with better mental, physical, and overall health when equity in the home is negative or low. This finding suggests that the relationship between homeownership and health is complicated by, and is even dependent upon, home equity levels.
Taken as a whole, the research in this book indicates that there are, indeed, nonfinancial benefits to homeownership and that while many of these consequences do occur at the household level, benefits may also extend to the broader community. These findings suggest that the social benefits of homeownership provide an important justification for continuing to support homeownership, even when its financial benefits are not guaranteed.