Facilitating new homeownership for households with lower incomes has been the objective of various policy and program initiatives. However, whether homeownership is sustainable for this population has been questioned; in particular, it has been suggested that low-income homeowners may be less likely to foresee necessary maintenance expenses and less likely to maintain or improve their properties. Such behavior may make homeownership unsustainable and/or result in a loss of housing wealth.

In this paper, we examine the extent to which low-income homeowners spend on maintenance and improvements, as well as predictors of the decisions to make such expenditures. We also consider the relationship of reported maintenance and improvements spending to the house price appreciation rate and the economic rate of return on housing investment.

We use data from the Community Advantage Program (CAP) for the period 2003-2012.  The CAP is a targeted secondary mortgage market program for CRA-eligible mortgages that was designed with the goal of demonstrating the viability of lending to low-income families. After conducting a descriptive analysis, we estimate (1) logistic models predicting the decisions to spend on maintenance and improvements, (2) repeat sales models to measure the capital gains enjoyed by homeowners when home maintenance and improvement spending are controlled for, and (3) factor models to estimate the effects of home maintenance and improvement spending on the rate of return on housing investment for non-foreclosure sales.

Our preliminary results suggest that many CAP homeowners did not make any substantial maintenance or improvement expenditures during their period of homeownership, and that most spent less than the conventionally recommended 2% of house value. Maintenance expenditures were significantly more likely for CAP homeowners who purchased older houses, and income is not significantly related to maintenance spending. In contrast, improvements were more likely for CAP homeowners who not only purchased older properties but who also reported a larger family size, had a higher household income, and who purchased single-family detached houses. 

We also find that home maintenance and improvement spending is positively related to house price appreciation, with an annual gain of roughly 0.4% attributable to such investment. However, maintenance expenditure is not significantly related to the economic return from investment in housing, and improvement spending has a negative association with this outcome. Overall, our results suggest that there are positive capital gains from homeownership for this population but that spending on the house beyond essential routine maintenance may not increase the overall returns from homeownership.