Defining the American Dream

ocial Benefits of Homeownership

Posted on Monday, October 18, 2010

by NAR Research Staff
Recently, homeownership has been under attack. Media reports and pundits have questioned the wisdom of social policies – such as the mortgage interest deduction or the recent homebuyer tax credit -- that encourage and support homeownership. Given one “popular” view that housing caused the great recession of 2007-2009, such attacks are not surprising.
But what those critics don't take into account is that over the years, research has consistently shown the importance of the housing sector to the economy as well as the long-term social and financial benefits of homeownership to individual homeowners. NAR Research recently released a report on The Social Benefits of Homeownership and Stable Housing. We present highlights from that report below.
The economic benefits of the housing market and homeownership are immense and well documented. The housing sector directly accounted for approximately 14 percent of total economic activity in 2009. Less than half of Americans owned their homes at the beginning of the 20th century. Homeownership remained fairly stable until the onset of the Great Depression. In the subsequent two decades, the homeownership rate rose dramatically, easily topping 60 percent by 1960. Modest gains were made during the 1960s, 1970s and 1980s. However, during the early 1990s, the homeownership rate once again trended upward as mortgage rates steadily declined and the economy expanded at rates not experienced in many years. By 2004, 69 percent of Americans owned their homes – a record high. The homeownership rate has since declined to 66.9 percent as of the second quarter 2010. Still, that figure indicates that two thirds of U.S. households own their own home. (For more information, visit
Homeownership and Stable Housing
Homeownership and stable housing go hand-in-hand. Homeowners move far less frequently than renters, and hence are embedded into the same neighborhood and community for a longer period. According to the the Current Population Survey's report, Geographical Mobility 2008-2009, while 5.2 percent of owner-occupied residents moved from 2008 to 2009, nearly 30 percent of renters changed residential location.
The key reason for the higher “mover rate” among renters is the fact that renters are younger – that is, changing and searching for ideal jobs, not yet married, and hence, literally, less committed. The mover rate or percentage of people changing residence, among 20-to-24 year-olds was 27 percent, and for 25-to-29 year-olds it was 26 percent. The mover rate then declines rapidly from 14 percent for those in their early 30s to less than 5 percent for those 65 years or older.
As to why people move, the predominant reason given by Current Population Survey respondents in 2009 was housing-related. Almost one-third said they moved to a better home, a better neighborhood, or into cheaper housing. The second most popular reason cited was family-related at 26.3 percent. Work-related reasons (new job, lost job, easier commute, retired, etc.) were reported by only 17.9 percent of respondents. Very few indicated change of climate and health reasons for moving.
Census Bureau research found that homeownership does have a statistically significant impact of lowering the mover rate. That is, among people of the same age, same income, and same marital status, a person was significantly more likely to change residence in a given year if he or she was a renter rather than a homeowner. Homeowners bring stability to neighborhoods.
Homeownership and Civic Participation
Homeowners have a much greater financial stake in their neighborhoods than do renters. Because owners tend to remain in their homes longer, they add a degree of stability to their neighborhood. Homeowners also reap the financial gains of any appreciation in the value of their home, so they also tend to spend more time and money maintaining their residence, which also contributes to the overall quality of the surrounding community. Renters, with less wealth tied to a specific locality, have less incentive to protect the value of their property via the political process. The right to pass property to an heir or to another person also provides motivation to properly maintain the
The extent of community involvement and the benefits that accrue to society are hard to measure, but several researchers have found that homeowners tend to be more involved in their communities than renters. For example, homeowners were found to be more politically active than renters. Homeowners participate in elections much more frequently than renters. More than three quarters of homeowners have, at some point voted in local elections compared with 52 percent of renters. Research has also found a greater awareness of the political process among homeowners. About 38 percent of homeowners knew the name of their local school board representative, compared with only 20 percent of renters.
In general, research supports the view that homeownership brings substantial social benefits. Because of these extensive social benefits - what economists call positive externalities - policies that support sustainable homeownership are well justified.
For more information
The complete report, The Social Benefits of Homeownership and Stable Housing, is available at The report contains a complete listing of research studies and sources for the data and conclusions presented.


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