• Embed Doc
  • Copy Link
  • Readcast
  • Collections
  • CommentGo Back
Download
 
FRBNY Economic Policy Review / June 200387
Effects of Homeownershipon Children:
 
The Role ofNeighborhood Characteristicsand Family Income
1.
Introduction
recent press release from the U.S. Department of Housingand Urban Development (HUD) captures the wide-ranging benefits increasingly being attributed tohomeownership: “Homeowners accumulate wealth as theinvestment in their homes grows, enjoy better livingconditions, are often more involved in their communities, andhave children who tend on average to do better in school andare less likely to become involved with crime. Communitiesbenefit from real estate taxes homeowners pay, and from stableneighborhoods homeowners create” (U.S. Department of Housing and Urban Development 2000). This credoundergirds the last decade’s push to extend homeownership toall Americans, particularly low-income families and racialminorities. Because it is believed to strengthen not only familiesbut communities, homeownership is being promoted as animportant strategy for regenerating distressed urbanneighborhoods.Enormous amounts of money, both public and private, arebeing invested in increasing the homeownership rate. From the$2trillion “American Dream Commitment” of FannieMae, tothe multimillion-dollar homeownership programs of theEnterprise Foundation, the Local Initiatives SupportCorporation, and the Neighborhood ReinvestmentCorporation, to the millions of dollars of programs andincentives under HUD’s control, a consistent view of homeownership as a “silver bullet” has emerged. Incentives forhomeownership even appear in the welfare reform plans of anumber of states.Despite this significant investment, there is remarkably littleknown about the real effects of homeownership on eitherhomeowners, their children, or their communities. This paperfocuses on one aspect of homeownership: its potential long-term effects on children. Several recent studies have found thatgrowing up in a homeowning family exerts positive effects onchildren’s development and outcomes (Green and White 1997;Aaronson 2000; Boehm and Schlottman 1999; Haurin, Parcel,and Haurin 2000). But what accounts for these positive effects,and whether other features may either strengthen or weakenthem, is unclear. One such feature is the neighborhood. Sincemany families who will become new homeowners undercurrent policies promoting homeownership for the poor willpurchase homes in areas traditionally thought of as troubled ordistressed, it is important to understand whether neighbor-hood characteristics play a role in the effects of homeownershipon children’s outcomes.To our knowledge, only Aaronson (2000) has explored thislink. He finds that parental homeownership in low-incomecensus tracts has a more positive effect on high-school
Joseph M. Harkness and Sandra J. Newman
Joseph M. Harkness is a research statistician at the Institute for Policy Studiesat Johns Hopkins University; Sandra J. Newman is a professor of policy studiesand the director of the Institute for Policy Studies.The authors gratefully acknowledge the Fannie Mae Foundation for itssupport of this research; the helpful insights of their discussant, Frank Braconi;and Sally Katz, Amy Robie, and Laura Vernon-Russell for research assistanceand production help. Certain copyrighted material is used with the permissionof the Fannie Mae Foundation.
The views expressed are those of the authorsand do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System.
A
 
88Effects of Homeownership on Children
graduation than it does in high-income census tracts. Thisintriguing result suggests that homeownership may bufferchildren against the damaging effects of growing up indistressed neighborhoods. But Aaronson also finds thatneighborhood residential stability enhances the positive effectsof homeownership on high-school graduation, which suggeststhat at least some of the positive effects of homeownershipfound in other studies may be attributed to the greater resi-dential stability of the neighborhoods where homeowners live.Very different policy recommendations emerge from thesetwo results. According to the first, homeownership should bepromoted even—or especially—in very low-incomeneighborhoods. According to the second, neighborhoods thatare residentially stable are preferred, and efforts to stabilizedistressed neighborhoods by encouraging low-income familiesto purchase homes there may carry significant risks for the“pioneers,” the first homeowners in a distressed area.Another neighborhood feature that may play a role is thehomeownership rate, which has largely been ignored in thesizable and growing body of research on the effects of distressedneighborhoods on the life chances of children (see reviews by Jencks and Mayer [1990], Haveman and Wolfe [1995],Gephart [1997], Ellen and Turner [1998], and Moffitt [2001]).
1
 But if the silver-bullet view of homeownership benefiting notonly the immediate homeowning family but also thesurrounding community is correct, then the positive effects of homeownership on children’s outcomes may be attributed tothe tendency for homeowning families to live in neighbor-hoods of homeowners—not to the family’s homeownershipstatus, perse.This scenario also raises important policy concerns. As withneighborhood residential stability, if the homeownership ratein a neighborhood is responsible for the improved outcomes of children who live there, then policies encouraging poorfamilies to purchase homes in areas where there are fewhomeowners may be good for the neighborhood but bad forthe individual family. Since moving a neighborhood from a lowto a high rate of homeownership is likely to be a long-termprocess, the early “pioneer” homeowners would derive few orno benefits and, in fact, may bear considerable costs such as lowproperty values, high crime rates, poor schools, and, perhapsmost importantly, the inability to move elsewhere easily (thatis, selling a home is much more difficult than breaking a lease).A second feature that may alter the effects of homeownership on children is family income. Interest in thistopic is also motivated by policy concerns, since mosthomeownership promotion policies target low-incomefamilies. Previous research has examined this question only indirectly, and results are conflicting. For example, Green andWhite (1997) report estimates from one data set showing thatfamily income matters more for children of renters than forchildren of homeowners. They interpret this to mean that thepositive effects of homeownership on children erode withhigher incomes. But using another data set, Green and Whitefind that ownership of a more expensive home is morebeneficial to children, consistent with Aaronson’s (2000)finding that greater home equity is associated with betteroutcomes. Since higher income families tend to both live inmore expensive housing and have more equity in their homes,these results suggest that homeownership primarily benefitschildren of higher income families.This exploratory paper first tests whether homeownershiphas equally positive effects for children of low-income andhigher income families. Focusing on the low-income group, itthen examines whether, and how, these homeownership effectsare influenced by neighborhood attributes. The next sectionreviews theories of the ways in which homeownership couldbenefit children and how these benefits could be modified by neighborhood characteristics. We then describe our data,methods, and results. A discussion of the findings and theirpolicy implications follows.
2.
Background
There are three broad sets of explanations for the effects of homeownership on children’s outcomes. According to thefirst, there is a direct link between family homeownership andchildren’s outcomes. The second set, in contrast, posits thatdifferences in neighborhoods, not family homeownership,explain why children of homeowners have better outcomes.The third set speculates that neither homeownership norneighborhoods by themselves are the key explanatory factors,but rather that homeownership is associated with morefavorable outcomes
only under certain neighborhoodcharacteristics
. We refer to these as direct, indirect, andinteractive homeownership effects, respectively.
2.1Direct Homeownership Effects
The literature suggests four paths through which parentalhomeownership could affect children’s outcomes: 1)parentingpractices, 2)physical environment, 3)residential mobility, and4)wealth.Haurin, Parcel, and Haurin (2000) find that homeowningparents provide a more stimulating and emotionally supportive environment for their children, which significantly 
 
FRBNY Economic Policy Review / June 200389
improves cognitive ability and reduces behavioral problems.They attribute the improved parenting of homeowners toeither their greater investment in their properties or residentialstability, both of which are explored below. Anotherexplanation, supported by some empirical evidence, is thathomeownership produces greater life satisfaction or self-esteem for adults, which, in turn, provides a more positivehome environment for children (Balfour and Smith 1996;Rossi and Weber 1996; Rohe and Basolo 1997; Rohe andStegman 1994b). Sherraden (1991) argues that thepsychological benefits of homeownership for adults derivefrom its function as an asset. Green and White (1997) offerseveral wide-ranging hypotheses of the potential links betweenhomeownership and children’s outcomes, including thepossibility that experience with contractors and repairpersonnel may improve homeowning parents’ interpersonaland management skills, which may transfer to their children.Except for gross, health-threatening inadequacies, little isknown about how children are affected by their dwellings’conditions.
2
But it is plausible that the physical features of owned versus rental housing may also affect children’sdevelopment. More than four-fifths of owned homes aresingle-family, detached structures, compared with less thanone-fourth of rental properties.
3
These environments may bebetter for children because, for example, they are likely to bemore spacious and private. Owned homes are also likely to bein better physical condition because owner occupants are morelikely to invest in the quality of their dwellings (Galster 1987;Mayer 1981; Spivack 1991). Since higher quality housing isgenerally more expensive, the previously cited findings of Green and White (1997) and Aaronson (2000)—that moreexpensive housing has favorable long-term effects onchildren—lend support to the view that the physical quality of housing matters. But their findings also suggest that the lowerquality housing affordable to low-income homebuyers may notbenefit their children significantly.Several studies demonstrate that moving can harmchildren’s educational outcomes (Haveman, Wolfe, andSpaulding 1991; Astone and McLanahan 1994; Jordan et al.1996; Hanushek, Kain, and Rivkin 1999), and there issubstantial evidence that homeowners move far less often thanrenters (Barrett, Oropes, and Kanan 1994; Hanushek andQuigley 1978; Newman and Duncan 1979; Quigley andWeinberg 1977). Included here are recent studies that detect acausal, not merely correlational, impact of homeownership ona reduced likelihood of moving (Ioannides and Kan 1996; Kan2000). Aaronson (2000) investigates this issue, and finds thatmuch of the positive effect of homeownership on childhoodoutcomes can be attributed to its impact on residential stability.Home equity is the most significant asset held by mostAmerican families, and for many, their only asset. Onefunction of assets is that they can be leveraged during times of need, which could benefit children. For example, homeowningparents can borrow money against the equity in their home tofinance a child’s college education. In addition, inheritablewealth constitutes a child’s claim on the future, enabling long-term planning and higher expectations (Conley 1999).Empirical evidence suggests a link between home value orequity and favorable youth outcomes (Aaronson 2000; Boehmand Schlottman 1999; Conley 1999), such as the likelihood of acquiring a college education. However, these estimates couldbe biased upward because they are likely to be picking up atleast some of the impact of neighborhood characteristics,which are not controlled for in these studies. In addition,homeownership as an asset-building tool could fail to benefitpoor children if the down payment and ongoing maintenancecosts absorb resources that might otherwise be invested inchildren’s development. The tax advantages of homeownershipare also disproportionately reaped by the more affluent, whichcould lead to better outcomes for their children.
2.2Indirect Homeownership Effects
A second perspective is that the findings of previous studies onthe benefits of homeownership are spurious because it is thebetter neighborhoods and schools experienced by children of homeowners—not growing up in an owned home—thataccount for their better outcomes.
4
Because homeownersgenerally live in communities characterized by higher incomes,higher rates of homeownership, and greater residentialstability, their children will benefit from these positiveneighborhood externalities.Homeownership may generate positive neighborhoodexternalities through its effect on either physical or socialcapital. As noted, owner-occupied houses appear to be bettermaintained than rental properties (Galster 1987; Mayer 1981;Spivack 1991), providing one form of neighborhood amenity that may benefit children. But theory also suggests that becausehomeowners’ financial stake in their properties is illiquid andnot easily extracted, homeowners will be more active inmaintaining or improving the quality of their neighborhoods,not just their own houses.A substantial body of research suggests that homeowners aremore attached to their communities and more active incommunity affairs (Rossi and Weber 1996; DiPasquale andGlaeser 1999; Blum and Kingston 1984; Austin and Baba 1990).
of 00

Leave a Comment

You must be to leave a comment.
Submit
Characters: ...
You must be to leave a comment.
Submit
Characters: ...