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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.

Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberwo:17166
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    Cited by:

    1. Òscar Jordà & Moritz Schularick & Alan M. Taylor, 2016. "The great mortgaging: housing finance, crises and business cycles," Economic Policy, CEPR;CES;MSH, vol. 31(85), pages 107-152.
    2. Cenkhan Sahin, 2016. "Macroeconomic effects of mortgage interest deduction," DNB Working Papers 514, Netherlands Central Bank, Research Department.
    3. Fetter, Daniel K., 2016. "The Home Front: Rent Control and the Rapid Wartime Increase in Home Ownership," The Journal of Economic History, Cambridge University Press, vol. 76(04), pages 1001-1043, December.
    4. Kimbrough, Gray, 2013. "The Educational Legacy of the Greatest Generation: Paternal Military Service and Baby Boomer Educational Progress," UNCG Economics Working Papers 13-16, University of North Carolina at Greensboro, Department of Economics, revised 03 May 2016.
    5. Matthew J. Hill, 2014. "Homes and husbands for all: Marriage, housing and the baby boom," Economics Working Papers 1452, Department of Economics and Business, Universitat Pompeu Fabra.
    6. John Gathergood & Joerg Weber, 2015. "Is Poor Financial Literacy a Barrier to Home Ownership?," Discussion Papers 2015/16, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    7. Moritz Schularick & Alan Taylor & Oscar Jorda, 2016. "The Great Mortgaging," 2016 Meeting Papers 185, Society for Economic Dynamics.
    8. repec:eee:juecon:v:99:y:2017:i:c:p:62-78 is not listed on IDEAS
    9. 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.
    10. Daniel K. Fetter, 2014. "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.
    11. Agarwal, Sumit & Hu, Luojia & Huang, Xing, 2013. "Rushing into American Dream? House Prices, Timing of Homeownership, and Adjustment of Consumer Credit," Working Paper Series WP-2013-13, Federal Reserve Bank of Chicago.
    12. Matthew Larsen & T. McCarthy & Jeremy Moulton & Marianne Page & Ankur Patel, 2015. "War and Marriage: Assortative Mating and the World War II GI Bill," Demography, Springer;Population Association of America (PAA), vol. 52(5), pages 1431-1461, October.
    13. Olsen, Edgar O. & Zabel, Jeffrey E., 2015. "US Housing Policy," Handbook of Regional and Urban Economics, Elsevier.
    14. Arthur Acolin & Jesse Bricker & Paul Calem & Susan Wachter, 2016. "Borrowing Constraints and Homeownership," American Economic Review, American Economic Association, vol. 106(5), pages 625-629, May.
    15. Ran Abramitzky, 2015. "Economics and the Modern Economic Historian," NBER Working Papers 21636, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • N00 - Economic History - - General - - - General
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
    • N92 - Economic History - - Regional and Urban History - - - U.S.; Canada: 1913-
    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy

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