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Did Housing Policies Cause the Post-War Boom in Homeownership? A General Equilibrium Analysis

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Author Info

  • Matthew Chambers

    ()
    (Department of Economics, Towson University)

  • Carlos Garriga

    (Federal Reserve Bank of St. Louis)

  • Don E. Schlagenhauf

    ()
    (Department of Economics, Florida State University)

Abstract

The objective of this paper is to understand the sources of the boom in home ownership between 1940 and 1960. The increase over this period was five times larger than the recent episode 1996-2004. In the post-depression period the government opted to intervene and regulate housing finance, provide assistance programs (i.e. through the Veteran Administration), and change tax provision towards housing. The result was a change in the maturity structure of mortgage loans, downpayment requirements and increase of credit. In addition, the economy underwent important changes in the demographic structure, the income distribution. The relative importance of these different driving forces is analyzed using a quantitative general equilibrium overlapping generation model with housing. The parameterized model is consistent with key aggregate and distributional features in the U.S. in 1940. In contrast to the recent episode, income and demographics are the crucial variables in accounting for the increase in homeownership. Essentially, the level and shape of income over the life-cycle are a precondition for the government reforms in housing markets and housing finance to play an important role in generating an increase in the aggregate home ownership. The increase in life expectancy and the shift in the distribution of age cohort also had a significant effect in the demand for housing.

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File URL: http://www.towson.edu/cbe/economics/workingpapers/2011-01.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Towson University, Department of Economics in its series Working Papers with number 2011-01.

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Length: 29 pages
Date of creation: Feb 2011
Date of revision: Feb 2011
Handle: RePEc:tow:wpaper:2011-01

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Postal: Towson, Maryland 21252-0001
Phone: 410-704-2959
Fax: 410-704-3424
Web page: http://www.towson.edu/cbe/economics/
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Keywords: Housing Finance; First-time buyers; life-cycle.;

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References

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  1. Harold L. Cole & Lee E. Ohanian, 2001. "New Deal policies and the persistence of the Great Depression: a general equilibrium analysis," Working Papers 597, Federal Reserve Bank of Minneapolis.
  2. R. J. Saulnier, 1950. "Introductory pages to "Urban Mortgage Lending by Life Insurance Companies"," NBER Chapters, in: Urban Mortgage Lending by Life Insurance Companies, pages -23--16 National Bureau of Economic Research, Inc.
  3. Pedro Amaral & James C. MacGee, 2002. "The Great Depression in Canada and the United States: A Neoclassical Perspective," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 45-72, January.
  4. Harold L. Cole & Lee E. Ohanian, 2001. "The great U.K. depression: a puzzle and possible resolution," Staff Report 295, Federal Reserve Bank of Minneapolis.
  5. Matthew Chambers & Carlos Garriga, 2005. "Accounting for Changes in the Homeownership Rate," Computing in Economics and Finance 2005 304, Society for Computational Economics.
  6. Raymond J. Saulnier, 1950. "Urban Mortgage Lending by Life Insurance Companies," NBER Books, National Bureau of Economic Research, Inc, number saul50-1, octubre-d.
  7. Fabrizio Perri & Vincenzo Quadrini, 2002. "Data Appendix to The Great Depression in Italy: Trade Restrictions and Real Wage Rigidities," Technical Appendices perri02, Review of Economic Dynamics.
  8. Rosen, Harvey S & Rosen, Kenneth T, 1980. "Federal Taxes and Homeownership: Evidence from Time Series," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 59-75, February.
  9. Leo Grebler & David M. Blank & Louis Winnick, 1956. "Capital Formation in Residential Real Estate: Trends and Prospects," NBER Books, National Bureau of Economic Research, Inc, number greb56-1, octubre-d.
  10. R. J. Saulnier, 1950. "Appendices to "Urban Mortgage Lending by Life Insurance Companies"," NBER Chapters, in: Urban Mortgage Lending by Life Insurance Companies, pages 107-180 National Bureau of Economic Research, Inc.
  11. Saul B. Klaman, 1961. "The Postwar Residential Mortgage Market," NBER Books, National Bureau of Economic Research, Inc, number klam61-1, octubre-d.
  12. R. J. Saulnier, 1950. "Scope of Urban Mortgage Lending by Life Insurance Companies," NBER Chapters, in: Urban Mortgage Lending by Life Insurance Companies, pages 1-19 National Bureau of Economic Research, Inc.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Did Housing Policies Cause the Post-War Boom in Homeownership? A General Equilibrium Analysis
    by Christian Zimmermann in NEP-DGE blog on 2011-03-30 14:59:05
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Cited by:
  1. Daniel K. Fetter, 2011. "How Do Mortgage Subsidies Affect Home Ownership? Evidence from the Mid-century GI Bills," NBER Working Papers 17166, National Bureau of Economic Research, Inc.
  2. 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.
  3. Alexis Anagnostopoulos & Orhan Erem Atesagaoglu & Eva Carceles-Poveda, 2012. "Skill-Biased Technological Change and Homeownership," Department of Economics Working Papers 12-09, Stony Brook University, Department of Economics.

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