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 The American Dream or The American Delusion?The Private and External Benefits of Homeownership
 
Grace W. Bucchianeri
The Wharton School of Business
 Abstract: This paper uses a unique data set that links up well-being measures and housing characteristics to explore: (1) the relationship between homeownership and well-being; (2) timeuse pattern, family life, social connectedness and civic participation of homeowners; and (3) theimplications of cross-sectional differences in neighborhood ownership rates, especially among subgroups of similar socio-economic status. The results show that after controlling forhousehold income, housing quality, and health, homeowners are no happier than renters by any of the following definitions: life satisfaction, overall mood, overall feeling, general moment-to-moment emotions (i.e. affect) and affect at home but instead derive more pain from their houseand home. Time use pattern analysis reveals that homeowners tend to spend less time onenjoyable activities. There is little evidence that homeowners are better citizens. Homeowners who live in ZIP code areas with higher rates of homeownership report more positive attitudesonly if other owners are similar to them in socio-economic terms, lending some support to theidea of beneficial social interaction among owners.
 
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IntroductionHomeownership is central to the notion of the American Dream in the publicimagination. In a national survey, 65 percent of the respondents cited the “dream” as a majorreason to buy a home. (Fannie Mae 2003) It helps justify the mortgage interest tax deduction,housing programs and policy platforms for politicians from either sides of the aisle.
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Thisromantic view of homeownership alludes to important private and external benefits of homeownership, separate from the benefits of housing consumption on its own. Using a new dataset that provides information on housing consumption, well-being and time use patterns for aboutsix hundred women in Columbus, OH, this paper explores homeownership along threedimensions: 1) the relationship between homeownership and well-being; 2) time use pattern,family life, social connectedness and civic participation of homeowners; and 3) the implicationsof cross-sectional differences in neighborhood homeownership rates, especially amongsubgroups of similar socio-economic status.The main contribution of this paper to the existing literature is apparent – the wide arrayof both outcome variables and control variables enables a much more comprehensive andcredible comparison between owners and renters. My analysis explores subjective well-beingmeasures such as life satisfaction and emotions (affect) during family time to complement amore traditional set of objective outcome measures such as BMI and time use patterns. Theexplicit analysis of overall outcomes (such as happiness), specific outcome variables (such as joyfrom children) and intermediate variables (such as time use patterns) helps fill in the gap in theliterature, which has so far focused on specific outcomes. (Dietz and Haurin 2003) I have alsolimited my analysis to single-family home occupants, thus eliminating bias arising fromcomparing different living arrangements and life styles in single-family homes and multi-family
 
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units. In Section 3, I examine in details the comparability of owners and renters, and the externalvalidity of the analysis given the non-standard aspects of the data set, including its gender andgeographical restrictions.How much do we know about the benefits of homeownership? The literature on theprivate benefits of homeownership is inconclusive despite the well-referenced but rarelymeasured “pride of homeownership”. Rossi and Weber (1996) find that homeowners are happierusing the NSFH but not the GSS. In Rohe and Stegman (1994) and Rohe and Basolo (1997),renters who became owners reported to be more satisfied than continuing renters. Galster (1987)and other later studies, however, point out the ownership-happiness link might well be the resultof data limitation and the relationship between hard-to-measure neighborhood or personalcharacteristics and homeownership. So far the evidence concerning the exact homeownership-well-being mechanisms remain inconclusive. (Rohe et al. 2002) To shed light on this subject, Ifirst re-assess the owner-renter differences by controlling for a wide array of confoundingfactors. I also directly investigate the potential channels homeownership might promote well-being: self-esteem, health, joy and pain from related domains of life (e.g., neighborhood, family,home), time use patterns and moment-to-moment emotions of homeowners in relation to theirleisure, family and social lives.Previous work on the external benefits of homeownership focuses on social capitalgeneration and child outcomes.
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Attempts to measure the social capital related to homeownershiphave produced different results. DiPasquale and Glaeser (1999) suggest that homeowners aremore active and involved citizens. Ellen et al. (2002) identify a causal link between two NewYork City homeownership programs and price increases in surrounding neighborhoods in thesame ZIP code but provide no direct evidence on the mechanism. Green and White (1997),
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