Does homeownership promote wealth accumulation?

Abstract

It is well known that homeowners are richer than renters, even after controlling for observable characteristics. This is often used as an argument for policies that foster homeownership. However, the causal link between homeownership and wealth is difficult to establish due to many potential sources of endogeneity. Utilizing the Household Finance and Consumption Survey for the Euro area, we correct for endogeneity by using inheriting the household's main residence as an instrument. The exclusion restriction is that conditional on the total amount of inheritance, inheriting a home affects the wealth position of the household only through homeownership. For the sample of inheritors we find that the local average treatment effect for households that inherit a home and stay homeowners is negative. Owning a home reduces riches due to sizable reductions in the net holdings of financial and other real wealth of the treated households.

Unconventional Monetary Policy and Wealth Inequalities in Great Britain*

“…(Bivens, 2015; Adam and Tzamourani, 2016; Bunn et al ., 2018; Lenza and Slacalek, 2018). As this finding is partly driven by the share of households in GB with no housing assets at all (around 25% according to our estimates), it adds to the policy relevant literature suggesting that the promotion of home ownership for lower wealth groups should lead to lower wealth inequality (see, Kaas, Kocharkov and Preugschat (2019)).…”

First-Generation Highly Skilled Migrants from a South-Asian Country

“…Still, such findings are not conclusive; McCabe (2016) suggest that the contribution of homeownership to civic engagement as marginal while Aaronson (2000) suggests that even with residential stability, life events experienced by homeowners could force them to move. Further, although homeownership assumes an important place in an individuals' life due to a myriad of possibilities associated with it, more recent studies showed that the homeownership rate has been declining (Bourassa, Shi 2017;Ceritoglu 2019;Kaas et al 2019). For example, Kaas et al (2019) showed that owning a home reduces the net holdings of financial and other real wealth suggesting a negative effect of homeownership on household wealth.…”

“…Further, although homeownership assumes an important place in an individuals' life due to a myriad of possibilities associated with it, more recent studies showed that the homeownership rate has been declining (Bourassa, Shi 2017;Ceritoglu 2019;Kaas et al 2019). For example, Kaas et al (2019) showed that owning a home reduces the net holdings of financial and other real wealth suggesting a negative effect of homeownership on household wealth. Further, Ceritoglu (2019) showed that the global financial crisis led to rise house price with compared to rent revealing a lower rent inflation, which encourages households to remain as renters suggesting a decrease in the profitability of investing in housing.…”