Homeownership and Wealth Among Low and Moderate Income Households

Publication Date

March 2011

Author(s)

Clinton C. Key, Krista Holub, Michal Grinstein-Weiss, Shenyang Guo, Yeong Hun Yeo

Client/Funder

Ford Foundation

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Researchers finds that investing in a home yields higher short-term economic returns for low-income households than renting and choosing other forms of investment and consumption.

Using a set of low- and moderate-income homeowners who received prime mortgages through from the Community Advantage Program (CAP) panel and a matched set of renters, UNC researchers assess the effect of homeownership on net worth and components of net worth.

Their aim is to test the claim that, all else being equal, investing in a home yields higher short-term economic returns than renting and choosing other forms of investment and consumption. They attempt to isolate the effect of homeownership from the factors that cause both homeownership and increases in wealth using three matching approaches that address sample selection and endogeneity in the data.

Findings indicate that LMI homeowners experience greater short-run change in net worth, assets and non-housing net worth than do renters, after balancing renters and owners on observed characteristics and adjusting for influential outlying cases.

These findings are particularly interesting because the period of study coincides with the housing crisis and periods of shrinking home values and equity.