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Owning a home is less than costly than renting for low-income homeowners who obtain quality mortgages, according to new research by the UNC Center for Community Capital.

The research is one of few existing empirical studies that address the long-standing question of whether government efforts to promote low-income homeownership actually yield financial benefit for low-income households. The results were published this month in The Journal of Regional Analysis & Policy.

“Some critics of low-income homeownership programs suggest that they may do more financial harm than good to the households involved, and that low-income households would have been better off renting than owning during the recent housing price bubble and subsequent financial crisis,” said Sarah F. Riley, senior research economist at the center and co-author of the study with researchers HongYu Ru and Qing Feng.

“But as always, real estate fundamentals determine whether owning is more or less costly than renting,” Riley said. “The timing of when the house is purchased, how long it is held and what happens to house prices during that time play the major role in determining the relative cost of owning.”

Researchers examined the “user costs” of owning vs. renting, that is, the total cost of homeownership, which includes mortgage payments, maintenance expenses, taxes, insurance premiums and so forth relative to the monthly rent that would have been paid on a comparable property.  The sample of largely urban low-income homeowners considered in the study obtained high-quality mortgages through a national model affordable home loan program.

For the period 2003 to 2011, leading into and including the financial crisis, researchers found the median cumulative user cost of owners at about $51,700, with capitalization rates of 8-10 percent. These households would have experienced a median cumulative equivalent rent of approximately $78,700 if they had chosen to rent instead of own during the same period.

The study is available online at

Mortgage finance is a key area of study for the UNC Center for Community Capital, the leading center for research and policy analysis on the transformative power of capital on households and communities in the United States. Part of the College of Arts and Sciences at the University of North Carolina at Chapel Hill, the center offers data and analysis that helps policymakers, advocates and the private sector find sustainable ways to expand economic opportunity to more people more effectively. For more information, visit or call (919) 843-2140.


Topics(s): Affordable Homeownership, Impacts of Homeownership, Mortgage Finance
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