Claims of Homeownership's Social Benefits Rise from the Grave

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" 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.

So it's no surprise that over the last five years there hasn't been much new research on the ancillary benefits of homeownership. But last week, Richard Green and Michelle White, along with USC real estate professor Gary Painter, came out with a new study that defends and elaborates on their earlier work.

The paper, titled "Measuring the Benefits of Homeowning: Effects on Children Redux," finds once again that the kids of homeowners have lower dropout rates and lower teen birth rates than the children of renters.

The authors went further this time than in their earlier work – analyzing the outcomes for kids according to the size of their parents' down payment. And they found that making a down payment of any size is correlated with better outcomes for kids, but bigger down payments are not associated with better outcomes than smaller ones.

One problem with the results is that they rely on data that runs only until 2007, which is when the nationwide foreclosure crisis started. Doesn't it seem likely that adding data from the last five years might have affected the results?

To be fair to the authors, they were using the most recent information available, and they plan to update their findings with data that runs up to 2009.

Also, the authors did attempt to identify other variables that might explain the correlation between homeownership and improved outcomes for kids, and they didn't find any. And they are careful not to overstate their findings by claiming that homeownership definitely causes better outcomes for kids.

"Does buying a home make you a better person? No, but the discipline associated with saving for even a small down payment and subsequently managing a house is, on average, associated with the discipline needed to promote better outcomes for children," Green said in a news release announcing the study's findings.

The biggest problem I have with the research is not its methodology. Rather, it is the study's very existence.

Someone please remind me why we need another research paper showing a statistical correlation between homeownership and improved social outcomes.

We've already got a thick sheaf of similar studies, and as far as I can tell, their relatively narrow findings are not in much dispute, although their relevance to our nation's current plight certainly is. We've seen more than 4 million homes lost to foreclosure since 2007, which sure seems like a worthwhile research topic to me.

So why do we have this new study? I don't know the answer, but I can't help but wonder whether it has something to do with the interests of the people who paid for it.

The researchers received $40,000 in grant money from the Research Institute for Housing America, according to Green. The Research Institute for Housing America is an arm of the Mortgage Bankers Association, the Washington-based group that lobbies for greater access to homeownership. 

Like I said, watch out for zombies.

Kevin Wack is a reporter covering consumer finance for American Banker. The views expressed are his own.