Association for Public Policy Analysis & Management

Homeownership has long been associated with a myriad of economic, social and civic benefits, including increased wealth and economic stability, greater political participation, and access to better neighborhoods and schools. As a result, expanding homeownership among lower-income families has been a cornerstone of housing policy in many countries. However, comparisons between renters and owners are plagued by the correlation between tenure and socioeconomic characteristics as well as selection bias, making it hard to convincingly attribute differences in housing outcomes to tenure alone. In this paper, we present new evidence on the causal impact of homeownership on housing outcomes, focusing on housing and neighborhood quality. Does homeownership increase the likelihood that a low-income family will live in a “better” home or a “better” neighborhood? To answer these questions, we employ a unique, longitudinal dataset of renters who applied for a state mortgage program in Norway between 2004 and 2009. While the mortgage program is nationwide, it is administered locally by 428 municipalities, giving rise to substantial heterogeneity in program criteria and approval rates, meaning that renters with similar characteristics may be approved for a mortgage in one municipality but rejected in another. This heterogeneity allows us to control for selection bias in the decision to become a homeowner: while all applicants to the program reveal their desire to own, not all will receive a mortgage and be able to act on it. Using propensity score matching to select comparable renters and new owners in the data, we observe outcomes for the two groups through the end of 2013. We present evidence on two outcomes: neighborhood attainment (e.g., do owners live in higher income or higher wealth neighborhoods) and housing quality (e.g., are they less likely to live in crowded or poorly maintained units).