Affording Homeownership
Paper Session
Sunday, Jan. 3, 2027 2:30 PM - 4:30 PM (EST)
- Chair: Ingrid Ellen Gould, New York University
Optimal Investment Under Housing Affordability Constraints: The Role of Shared Ownership
Abstract
Using a rich and realistically calibrated life cycle model, we study the impact of access to a hybrid tenure, 'shared ownership', on individuals' optimal consumption, savings, and housing decisions. Shared ownership is a well established affordable housing tenure in the UK representing half of new affordable housing supply. It constitutes of buying a share of a home and paying subsidised rent to an institutional investor on the remainder.We find that access to shared ownership is most attractive to young, liquidity-constrained individuals who enter the housing market by buying a small share as well as old individuals who are in the process of decumulating their savings and are in turn selling shares of their home as they get older. Further, shared ownership leads to earlier housing market entry, later housing market exit, a decrease in individuals' loan-to-value ratio, and a reduction in moving activity at old age; all in comparison to a setting in which the individuals' rent-versus-own decisions are binary. Shared ownership as an additional tenure choice thus can be used as a way to enhance home ownership in areas with housing affordability constraints.
An Aging American Dream? The Rise and Fall of Homeownership Over Generations
Abstract
Household measures of homeownership in the U.S. have changed little since 1960, despite concern that homeownership is increasingly unaffordable. Here, we construct an individual homeownership rate by age, which includes spouses and partners of owners, but excludes cohabiting adult children. Leveraging this measure, we chronicle how age profiles of homeownership have shifted up and down, as well as rightwards, over the last century. Comparing cohorts at similar ages and years, the odds of owning a peaked for those born in the 1940s; homeownership for those born in the 1980s is roughly 15 percentage points lower, equaling that of cohorts born in the 1910s who reached adulthood during the Great Depression. Holding ownership by age constant since 1980, population aging should have pushed homeownership up by 6 percentage points; instead it fell by 5 points. State-level drops in the home purchasing power of young wage earners explain most of the decline in homeownership rates for those under 40, driven primarily by parental cohabitation.Income Inequality, Housing Regulation, and House Prices
Abstract
This paper studies a supply-side channel through which income inequality increases house prices in the United States. We develop a conceptual framework in which greater income inequality leads to more restrictive housing regulation, tighter housing supply, and higher house prices. Using county-level data from 1990 to 2017 and a novel Bartik-style instrument for the Gini coefficient, we find that a one standard deviation increase in the Gini coefficient raises house prices by 26 percent, accounting for roughly 8 percent of the house price increase over this period. Consistent with our framework, more unequal areas exhibit both higher house prices and fewer housing units. A one standard deviation increase in the Gini coefficient is associated with a 0.35 standard deviation increase in the Wharton Residential Land Use Regulation Index, a 58 percent decline in building permits issued over the subsequent decade, and a 2 percentage point decrease in the homeownership rate. Our findings highlight how income inequality shapes housing market dynamics through its impact on housing regulations and supply constraints, with important consequences for housing affordability.Discussant(s)
Jaclene Begley
,
Fannie Mae
Eirik Brandsaas
,
Federal Reserve Board
Richard Green
,
University of Southern California
Tom Cui
,
University of North Dakota
JEL Classifications
- R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location
- D3 - Distribution