Association for Public Policy Analysis & Management

The housing market crash in the mid-2000s was characterized by unusually high rates of mortgage delinquencies and foreclosures.  Thus, many families – including families with children -- faced the prospect of losing their homes. Much of the focus of research on the effects of foreclosure on children has been limited to educational outcomes (Comey and Grosz 2011; Been Ellen and Schwartz 2011; Isaacs 2012), but these studies are not based on nationally representative data.  To date there have been no studies addressing the impact of foreclosure on other aspects of child and family well-being. Yet, understanding the effects of foreclosure on children will inform a broad range of policies targeted to address these effects.

In this paper, I use a unique dataset linking the 2008 Survey of Income and Program Participation with individual foreclosure event records from RealtyTrac to examine the effects of foreclosure on changes in child well-being. This data set enables me to follow children in families facing foreclosure over time, even if they move. I explore the effects of foreclosure on several measures of child-well being, including family income, poverty status and program participation, food insecurity, health, educational outcomes, participation in extracurricular activities, parent-child interaction and neighborhood conditions. First, I compare the well-being of children in families who have experienced any foreclosure event with the well-being of children who did not experience the risk of losing their home Next, I estimate random and fixed effects regression models predicting child well-being. Dependent variables reflecting economic well-being and program participation are reported in the core SIPP data file for each wave; other measures of child well-being are derived from the Child Well-Being Topical Modules. My key independent variable is foreclosure status. I test a dichotomous measure of foreclosure (received any foreclosure notice) as well as a categorical measure of foreclosure that distinguishes among foreclosure stages (Notice of Default, Notice of Sale, Notice of Lender Ownership) . While the stress of undergoing any stage of the foreclosure process likely affects children, actually losing one’s home may have differential effects than experiencing the earlier stages of foreclosure.

In order to examine the effects of foreclosure on child well-being, I estimate random effects models. These models provide estimates of the association between experiencing a foreclosure event and the measures of child well-being. In order to examine the effects of foreclosure on changes in child well-being, I estimate fixed effects models for each dependent variable. The fixed effects regression models can be thought of modeling within-person changes in child well-being.  My models control for the experience of foreclosure events, child characteristics (age, sex, race, nativity status, presence of both parents in household, number of siblings), parental characteristics (age at birth of child, nativity status, disability status, educational attainment and employment status), and household characteristics (household type, housing tenure, whether the household was doubled up). I interact child age (0-4, 5-9, 10-14, 15-17) with foreclosure status in order to determine whether the effects of foreclosure differ for children of different ages.