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How Do Mortgage Subsidies Affect Home Ownership? Evidence from the Mid-century GI Bills

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  • Daniel K. Fetter

Abstract

The largest 20th-century increase in U.S. home ownership occurred between 1940 and 1960, associated largely with declining age at first ownership. I shed light on the contribution of coincident government mortgage market interventions by examining home loan benefits granted under the World War II and Korean War GI Bills. The impact of veterans' housing benefits on home ownership is positive for young men, and declines with age. Veterans' benefits increased aggregate home ownership rates primarily by shifting purchase earlier in life, explaining 7.4 percent of the overall 1940-60 increase and 25 percent of the increase for affected cohorts. A rough extrapolation suggests that broader changes in mortgage terms may explain 40 percent of the 1940-60 increase.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17166.

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Date of creation: Jun 2011
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Publication status: published as Daniel K. Fetter, 2013. "How Do Mortgage Subsidies Affect Home Ownership? Evidence from the Mid-century GI Bills," American Economic Journal: Economic Policy, American Economic Association, vol. 5(2), pages 111-47, May.
Handle: RePEc:nbr:nberwo:17166

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Cited by:
  1. Agarwal, Sumit & Hu, Luojia & Huang, Xing, 2013. "Rushing into American Dream? House Prices, Timing of Homeownership, and Adjustment of Consumer Credit," Working Paper Series, Federal Reserve Bank of Chicago WP-2013-13, Federal Reserve Bank of Chicago.
  2. Boustan, Leah P. & Margo, Robert A., 2013. "A silver lining to white flight? White suburbanization and African–American homeownership, 1940–1980," Journal of Urban Economics, Elsevier, vol. 78(C), pages 71-80.
  3. Kimbrough, Gray, 2013. "The Educational Legacy of the Greatest Generation: Paternal Military Service and Baby Boomer Educational Progress," Working Papers 13-16, University of North Carolina at Greensboro, Department of Economics.
  4. Daniel K. Fetter, 2013. "The Home Front: Rent Control and the Rapid Wartime Increase in Home Ownership," NBER Working Papers 19604, National Bureau of Economic Research, Inc.
  5. Daniel K. Fetter, 2013. "The Twentieth-Century Increase in U.S. Home Ownership: Facts and Hypotheses," NBER Chapters, in: Housing and Mortgage Markets in Historical Perspective, pages 329-350 National Bureau of Economic Research, Inc.

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