Research: Why Do We Want People to Own Homes?

One of the unspoken questions in all the discussion about subprime making home ownership available to all comers is, “Why do we want people to own homes?” After all, here was President Bush today in his subprime speech: “Owning a home has always been at the center of the American Dream”.

There is, perhaps unsurprisingly, oodles of research on the subject, and the answer is more equivocal than naive views of the subject would make you think.

In summary, the benefits to society of homeownership are smaller than typically advertised, and they are inconsistent. Deep subsidies are usually required — hence subprime, as a market “solution” — which are not always optimal. And there is a related question:

Do American prefer to own their own homes, or do they prefer the kinds of dwellings that are usually offered for sale (as opposed to the kinds offered for rent)?

More here.


  1. I know several older people who have recently used the sale of their home to finance their expense but required stay at assisted living or a nursing home.
    So while it might not be a great investment, I think you could look at it like a nice savings account (assuming you eventually pay off the house).

  2. It’s interesting that all of the measures of benefit are individual-level. That is, social benefits are assumed to be in individuals’ participation in community groups, their happiness, their confidence in institutions. But how might we account for more systemic, diffuse, or hard-to-measure variables? I’d like to see if crime decreases in owner-desnse areas, quality of schools, etc. Multicollinearity is still a major problem, but I’m less convinced by just whether individual homeowners are better off.

  3. Several years ago I owned a home for several years. I hated it. Fifteen years later, I’m renting for only a tad more than my house payment was. Add in all the other expenses, which are many, and I’m saving about $200 a month.
    Having said that, the one big value of home ownership is that it gives owners a stake in their community. They are more inclined to fix problems then just move.
    As for me, I just as soon move if things get rotten. Or I get another job. The family of a friend of my son has that precise problem. New job in another state. Prices stagnating. They can’t sell their house with a loss (or rent it–they couldn’t make enough to even cover half their monthly payment.)

  4. That Rossi PDF doesn’t deal with an obvious incentive: economic benefit.
    It does show that homeowners are wealthier / more afflute than renters, but it doesn’t cover the economic / wealth incentives to owning a home.
    People are not dumb nor misled in their desire to own. For a long recent stretch of history (i.e. 300+ years), wealth has been steadily accumulated by land owners.
    Since when has owning your residence not been the best investment that average people make? There might be outliers who think: I can do better than investing in a home, but they are rare and often wrong.
    Economically, owning a home is a proven stable wealth preserver and generator.

  5. The only reason that homeowners have historically ended up with more money is that they could not easily get the money out of their house when they wanted it. Hence inflation takes over and house appreciates. Now that we can “dip into our savings” more easily with all kinds of loans we don’t end up with more money.

  6. Rafael Montoya says:

    Each person sees life and needs differently. For most the ownership of your house may be a way to control your life, to have recognition from the community and to have a place where your loved ones can stay and friends can hang out, even if the person is single. Also this can be done also with a rented place, and many prefer to do this.
    But when the government says that you should have ownership of your house it can get scary for the economy and the population. Think not only in terms of a bailout with taxpayers money, think also invasion and control of other people´s land.
    It is important that the person who wants to own a house should be able to do it with his/her own means, but it should not be on the level of a “patriotic duty”.
    The big economic reality is that the construction and sale of homes is an engine for development. The problem is when people who are not in the business get into it, either from the financial side or from the operation side.

  7. A classic failing of traditional economics: its standard of measurement of most things tends to be in dollars. As we know, there are many things that simply cannot be measured that way.
    Beyond the obvious tax advantages, there are psychological benefits to ownership which may not be precisely measured in dollars and sense: Pride of ownership, security, comfort, etc. (Joe mentioned stake in the community, and thats a perfect example)
    Its more complex a question than appears at first instance . . .

  8. Because everyone tells you you’re a slacker if you don’t own a home. The only reason you rent is because you can’t afford to buy, etc.
    That and the sizable government subsidy of buying a home in the mortgage deduction.

  9. It’s all about money.
    Mr. Bush wants you to own a home because it creates a lot more spending throughout the economy. If the economy is good then people are more likely to vote for the party in power.
    Similarly, the administration pushed for a war in Iraq because it would create a lot of spending for the military industrial complex. Mr. Cheney was instrumental in getting the war effort going because he had deep ties to defense contractors.

  10. I think the case for home ownership is a notion based on the underlying theme of property rights and a throwback to the foundations of America itself. If I remember the story of the Pilgrims correctly, under collective activity they starved, when provided with sections of land to work for their own benefit they thrived and there was more than enough food for everyone.
    Hernando De soto makes a great case for the importance of property rights and their effects on economic development. Owning a home is a pure expression of that, and if you look at the history of the US, land ownership based on those rights has been a fundimental strength and a part of Americas great heritage.

  11. i’ve never been convinced home ownership is that great an investent. people always say “i paid this and sold it for that”. but how much was paid in taxes and improvements in the home. that said, the major downside to home ownership is that owners are dead dull. whenever a friend buys a home they inevitably turn into a boring old fart. discussions about home improvment and lawn care and mortgages. god they are just horrible to be around.

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