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It’s Halloween: Claims of Homeownership’s Social Benefits Rise From the Dead

OCT 31, 2012 1:31pm ET
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You might have thought all those studies linking homeownership to a slew of wondrous benefits died with the foreclosure crisis.

But they're not dead. Like zombies, they've come back to life, just in time for Halloween.

The authors of a 15-year-old study that suggested you might save your kids from teenage pregnancy by buying a house have doubled down on their findings. More on that research in a bit, but first, some important context.

Back in the heady days when A&E's "Flip This House" was competing against TLC's "Flip That House," studies touting the various benefits of homeownership were key tools for housing industry lobbyists. The industry was trying to persuade the government to increase subsidies for home purchases, and it found support in academic research, much of which the industry had itself funded.

According to an advocacy report from the National Association of Realtors that summarized many of the findings, homeowners are better citizens than renters, and they're less likely to go on welfare.

Homeownership, the report also found, is linked to less crime, greater social cohesion, and even better health and greater happiness. Sounds pretty sweet, right?

One of the studies cited was a 1997 paper by Richard Green, now a real estate professor at the University of Southern California, and Michelle White, who is currently an economics professor at the University of California, San Diego.

Their research paper, titled "Measuring the Benefits of Homeowning: Effects on Children," found that owning a home is associated with lower high-school drop-out rates and lower teen pregnancy rates.

"The rather surprising result of the paper is that homeowning by parents benefits their children, who are less likely than children of renters to drop out of high school or to have children as teenagers. Both effects are largest for children of low-income households," the researchers concluded.

The authors wrote that their findings offered "some justification

The authors wrote that their findings offered "some justification" for government policies that favor homeownership, and they suggested that subsidies should be used to turn more renters into homeowners. (Green told me in an email that the authors did not receive grant money for the work.)

Once the housing bubble burst, the problems with this line of research became all too obvious.

Importantly, the mere fact that researchers found a correlation between homeownership and all kinds of more favorable outcomes did not prove that buying a house was the cause of those advantages.

After all, it could be that people who are responsible enough to save the cash necessary to buy a house are passing those same traits on to their children, and those traits, not the home purchase, are the cause of their kids' better outcomes. There could be other reasons, too.

Moreover, most of the studies were done at a time of rising home prices. Borrowing to buy a house carries some risk of foreclosure, and foreclosure brings a slew of negative consequences on the affected family. But as long as home prices were climbing, the risk of foreclosure wouldn't be as evident in the data.

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