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

  • Don E. Schlagenhauf

    (Florida State University)

  • Carlos Garriga

    (Federal Reserve Bank of St. Louis)

  • Matthew Chambers

    (Towson University)

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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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 1219.

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Date of creation: 2011
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Handle: RePEc:red:sed011:1219
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  1. Fabrizio Perri & Vincenzo Quadrini, 2002. "The Great Depression in Italy: Trade Restrictions and Real Wage Rigidities," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 128-151, January.
  2. Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2007. "Accounting for changes in the homeownership rate," FRB Atlanta Working Paper No. 2007-21, Federal Reserve Bank of Atlanta.
  3. 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.
  4. Raymond J. Saulnier, 1950. "Urban Mortgage Lending by Life Insurance Companies," NBER Books, National Bureau of Economic Research, Inc, number saul50-1, October.
  5. 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, October.
  6. 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.
  7. 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.
  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. 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.
  10. Harold L. Cole & Lee E. Ohanian, 2002. "Data Appendix to The Great U.K. Depression: A Puzzle and Possible Resolution," Technical Appendices cole02, Review of Economic Dynamics.
  11. 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.
  12. Saul B. Klaman, 1961. "The Postwar Residential Mortgage Market," NBER Books, National Bureau of Economic Research, Inc, number klam61-1, October.
  13. 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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