IDEAS home Printed from https://ideas.repec.org/a/ags/jrapmc/243953.html
   My bibliography  Save this article

The User Cost of Low-Income Homeownership

Author

Listed:
  • Riley, Sarah F.
  • Ru, Hong Yu
  • Feng, Qing

Abstract

Empirical research examining whether owning a home is less costly than renting for low-income households is largely lacking. We use detailed property information provided by a set of low-income homeowners who participated in the Community Advantage Panel Sur-vey, along with a matched sample of similar rental properties from the American Housing Survey, to determine whether low-income homeowners in the United States would have expe-rienced lower housing costs by renting between 2003 and 2011. We calculate the homeown-ers’ user costs directly from the survey data, and we derive hedonic measures of equivalent rent for these homeowners via pooled regressions of house prices and rents on housing char-acteristics, from which we obtain capitalization rates. For the median homeowner in our sample, we find that owning was less costly than renting a comparable property between 2003 and 2011.

Suggested Citation

  • Riley, Sarah F. & Ru, Hong Yu & Feng, Qing, 2013. "The User Cost of Low-Income Homeownership," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 43(2).
    • Handle: RePEc:ags:jrapmc:243953
    DOI: 10.22004/ag.econ.243953
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/243953/files/v43_n2_a3_riley_etal.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.243953?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Poterba, James M, 1992. "Taxation and Housing: Old Questions, New Answers," American Economic Review, American Economic Association, vol. 82(2), pages 237-242, May.
    2. Charles Himmelberg & Christopher Mayer & Todd Sinai, 2005. "Assessing High House Prices: Bubbles, Fundamentals and Misperceptions," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 67-92, Fall.
    3. Lusardi, Annamaria & Tufano, Peter, 2015. "Debt literacy, financial experiences, and overindebtedness," Journal of Pension Economics and Finance, Cambridge University Press, vol. 14(4), pages 332-368, October.
    4. Poterba, James M. & Sinai, Todd, 2011. "Revenue Costs and Incentive Effects of the Mortgage Interest Deduction for Owner-Occupied Housing," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(2), pages 531-564, June.
    5. Tracy M. Turner & Marc T. Smith, 2009. "Exits From Homeownership: The Effects Of Race, Ethnicity, And Income," Journal of Regional Science, Wiley Blackwell, vol. 49(1), pages 1-32, February.
    6. Todd Sinai & Nicholas S. Souleles, 2005. "Owner-Occupied Housing as a Hedge Against Rent Risk," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 763-789.
    7. Nicholas Oulton, 2007. "Ex Post Versus Ex Ante Measures Of The User Cost Of Capital," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(2), pages 295-317, June.
    8. Donald W. K. Andrews & Moshe Buchinsky, 2000. "A Three-Step Method for Choosing the Number of Bootstrap Repetitions," Econometrica, Econometric Society, vol. 68(1), pages 23-52, January.
    9. Boehm, Thomas P. & Schlottmann, Alan M., 2004. "The dynamics of race, income, and homeownership," Journal of Urban Economics, Elsevier, vol. 55(1), pages 113-130, January.
    10. Linneman, Peter, 1980. "Some empirical results on the nature of the hedonic price function for the urban housing market," Journal of Urban Economics, Elsevier, vol. 8(1), pages 47-68, July.
    11. JAMES G. MacKINNON, 2006. "Bootstrap Methods in Econometrics," The Economic Record, The Economic Society of Australia, vol. 82(s1), pages 2-18, September.
    12. Thesia I. Garner & Randal Verbrugge, 2007. "Puzzling Divergence of U.S. Rents and User Costs, 1980-2004: Summary and Extensions," Working Papers 409, U.S. Bureau of Labor Statistics.
    13. Dietz, Robert D. & Haurin, Donald R., 2003. "The social and private micro-level consequences of homeownership," Journal of Urban Economics, Elsevier, vol. 54(3), pages 401-450, November.
    14. James M. Poterba, 1984. "Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(4), pages 729-752.
    15. Fuad Hasanov & Douglas C. Dacy, 2009. "Yet Another View on Why a Home Is One's Castle," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(1), pages 23-41, March.
    16. Harding, John P. & Rosenthal, Stuart S. & Sirmans, C.F., 2007. "Depreciation of housing capital, maintenance, and house price inflation: Estimates from a repeat sales model," Journal of Urban Economics, Elsevier, vol. 61(2), pages 193-217, March.
    17. Shannon Van Zandt & William M. Rohe, 2011. "The sustainability of low-income homeownership: the incidence of unexpected costs and needed repairs among low-income home buyers," Housing Policy Debate, Taylor & Francis Journals, vol. 21(2), pages 317-341, March.
    18. John M. Quigley & Steven Raphael, 2004. "Is Housing Unaffordable? Why Isn't It More Affordable?," Journal of Economic Perspectives, American Economic Association, vol. 18(1), pages 191-214, Winter.
    19. Turner, Tracy M. & Luea, Heather, 2009. "Homeownership, wealth accumulation and income status," Journal of Housing Economics, Elsevier, vol. 18(2), pages 104-114, June.
    20. Bucks, Brian & Pence, Karen, 2008. "Do borrowers know their mortgage terms?," Journal of Urban Economics, Elsevier, vol. 64(2), pages 218-233, September.
    21. Anne B. Shlay, 2006. "Low-income Homeownership: American Dream or Delusion?," Urban Studies, Urban Studies Journal Limited, vol. 43(3), pages 511-531, March.
    22. Karl E. Case & Maryna Marynchenko, 2002. "Home price appreciation in low- and moderate-income markets," Communities and Banking, Federal Reserve Bank of Boston, issue Spr, pages 8-12.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wainer, Allison & Zabel, Jeffrey, 2020. "Homeownership and wealth accumulation for low-income households," Journal of Housing Economics, Elsevier, vol. 47(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Serena Fatica & Doris Prammer, 2018. "Housing and the Tax System: How Large Are the Distortions in the Euro Area?," Fiscal Studies, John Wiley & Sons, vol. 39(2), pages 299-342, June.
    2. Christian Hott, 2007. "Explaining house price fluctuations," Proceedings 1055, Federal Reserve Bank of Chicago.
    3. Antonia Diaz & Maria Jose Luengo Prado, 2008. "On the User Cost and Homeownership," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 584-613, July.
    4. Christian A. L. Hilber & Tracy M. Turner, 2014. "The Mortgage Interest Deduction and its Impact on Homeownership Decisions," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 618-637, October.
    5. Andrew Hanson & Hal Martin, 2014. "Housing Market Distortions and the Mortgage Interest Deduction," Public Finance Review, , vol. 42(5), pages 582-607, September.
    6. Wenli Li & Edison Yu, 2022. "Real Estate Taxes and Home Value: Evidence from TCJA," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 43, pages 125-151, January.
    7. Turner, Tracy M. & Luea, Heather, 2009. "Homeownership, wealth accumulation and income status," Journal of Housing Economics, Elsevier, vol. 18(2), pages 104-114, June.
    8. Garner, Thesia I. & Verbrugge, Randal, 2009. "Reconciling user costs and rental equivalence: Evidence from the US consumer expenditure survey," Journal of Housing Economics, Elsevier, vol. 18(3), pages 172-192, September.
    9. Piazzesi, M. & Schneider, M., 2016. "Housing and Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1547-1640, Elsevier.
    10. Hott, Christian, 2015. "A model of mortgage losses and its applications for macroprudential instruments," Journal of Financial Stability, Elsevier, vol. 16(C), pages 183-194.
    11. Dieci, Roberto & Westerhoff, Frank, 2016. "Heterogeneous expectations, boom-bust housing cycles, and supply conditions: A nonlinear economic dynamics approach," Journal of Economic Dynamics and Control, Elsevier, vol. 71(C), pages 21-44.
    12. Dieci, Roberto & Westerhoff, Frank, 2015. "Heterogeneous expectations, boom-bust housing cycles, and supply conditions: A nonlinear dynamics approach," BERG Working Paper Series 99, Bamberg University, Bamberg Economic Research Group.
    13. Elias Oikarinen, 2008. "Empirical application of the housing-market no-arbitrage condition: problems, solutions and a Finnish case study," Discussion Papers 39, Aboa Centre for Economics.
    14. Sarah Riley, 2012. "Land use regulations and the returns to low-income homeownership," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 49(3), pages 745-766, December.
    15. Sheng Guo & William G. Hardin, 2017. "Financial and Housing Wealth, Expenditures and the Dividend to Ownership," The Journal of Real Estate Finance and Economics, Springer, vol. 54(1), pages 58-96, January.
    16. Jinhyoung Kim & Thomas G. Johnson & Byung Min Soon, 2023. "An Explicit Spatial Approach to the Value of Local Social Amenities in Metro and Non-Metro Counties in the U.S.: Implications for Comprehensive Wealth Measurement," Land, MDPI, vol. 12(3), pages 1-31, February.
    17. John Y. Campbell & João F. Cocco, 2015. "A Model of Mortgage Default," Journal of Finance, American Finance Association, vol. 70(4), pages 1495-1554, August.
    18. Donald Bruce & Lawrence M. Kessler, 2022. "A SALT on Real Estate? Housing Market and Migration Responses to the Limit on the State and Local Tax Deduction," Working Papers 2022-01, University of Tennessee, Department of Economics.
    19. Gathergood, John & Weber, Jörg, 2017. "Financial literacy: A barrier to home ownership for the young?," Journal of Urban Economics, Elsevier, vol. 99(C), pages 62-78.
    20. Wenli Li & Edison Yu, 2020. "Real Estate Taxes and Home Value: Winners and Losers of TCJA," Working Papers 20-12, Federal Reserve Bank of Philadelphia.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:jrapmc:243953. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/mcrsaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.