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The Value of Owner Occupation in Neighborhoods

Author

Listed:
  • N. Edward Coulson
  • Seok-Joon Hwang
  • Susumu Imai

Abstract

Homeownership in the United States is heavily subsidized by the federal government. Any efficiency argument in favor of such subsidization policies must rely on homeownership’s external benefits. If such benefits exist, they should be observable through higher housing prices in neighborhoods that have higher homeownership rates. However, the simultaneity of the homeownership decision with other, perhaps unobservable, characteristics makes estimation of this effect difficult.We use the Neighborhood Cluster Sample of the American Housing Survey and estimate a hedonic model of single-family housing prices, with cluster homeownership as one of the hedonic characteristics. We control for self-selection into homeownership, unobserved individual traits, and unobserved neighborhood traits (along with a number of observables) and still find that housing prices are higher in high-ownership neighborhoods. Therefore, it is possible that subsidization of homeownership is justified on efficiency grounds.

Suggested Citation

  • N. Edward Coulson & Seok-Joon Hwang & Susumu Imai, 2002. "The Value of Owner Occupation in Neighborhoods," Journal of Housing Research, Taylor & Francis Journals, vol. 13(2), pages 153-174, January.
    • Handle: RePEc:taf:rjrhxx:v:13:y:2002:i:2:p:153-174
    DOI: 10.1080/26911337.2002.12519478
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