Homeownership rates of financially constrained households

We study tenure choice in the Swedish housing market with explicit considerations to budget restrictions in combination with parental wealth, parental income, age, ethnic background, recent movers as well as inter-regional geographic location. We use observations of some 1,010,534 households (corresponding to some 2.9 million inhabitants) to analyze the housing market in metropolitan Stockholm, Sweden. The results suggest, as expected, that the budget restriction is negatively related to owning. However, the results from this study also show that the budget restriction is more binding for young adults, recent movers and immigrants. This is somewhat reduced if we control for parental wealth and parental income. A budget restriction is also more binding in the suburbs of Stockholm than in the particularly high price central part of the city. These results indicates that the recently introduced borrowing constraint on the wealth side in Sweden, intended to reduce household debt, should include specific efforts directed at young adults as well as immigrants, in order to secure their ability to establish themselves on the housing market. One way would be the replace the Swedish child allowance that is paid for every child until the age of 16 with a means-tested individual interest rate subsidy for home buyers.