Last week I wrote about the first part of my recent research into beliefs about the benefits homeownership: messages conveyed to the American public during the 20th and early 21st centuries on outcomes associated with owning, which I argue fostered a set of commonly-held beliefs about the benefits of homeownership that persist today.
The second part of the study considers whether and how much these beliefs contribute to individual decisions about owning or renting, using data from the 2011 Fannie Mae National Housing Survey on renters’ intentions to buy homes in the future.
Survey respondents reported how much they agreed with statements about four outcomes potentially associated with homeownership—that it provides a good place to raise children, a safe physical structure, more control over living space, and more space for families —as well as one statement about financial advantages of owning over renting.
I estimated the effect of these beliefs on respondents’ stated intentions to buy a home in the future, controlling for other things likely to affect that decision, including individual socio-demographic characteristics (age, race, marital and family status), financial circumstances (employment status, current income, total debt, ability to quality for a mortgage, financial sacrifice required to own), and satisfaction with renting.
I found that beliefs about the benefits of homeownership are important predictors of intentions to own, with renters who reported believing in these five benefits of homeownership having between 70 and 280 percent higher odds of expecting to buy a home in the future, when compared to those without such beliefs and controlling for the other characteristics listed above.
Some of those characteristics, while less predictive than individual beliefs, were also still strongly associated with propensities for homeownership: for example, younger and minority renters, those with children, and those who report having a negative experience with renting were all much more likely to want to buy in the future, relative to older, white, childless renters with generally positive renting experiences. Those with higher incomes and for whom homeownership would require less financial sacrifice also had greater intentions of buying a home someday.
The amount of household debt, employment status, and ability to qualify for a mortgage, however, were not significantly related to expectations about future homeownership, suggesting that current economic constraints do not necessarily diminish renters’ long term aspirations for owning.
These findings confirm what has long been suspected but rarely studied about tenure decisions: that behavioral factors—specifically, beliefs in the benefits of homeownership—are a strong and important variable in decisions about homeownership, more so than most socio-demographic and economic conditions (with the exception of being a renter aged 25–34 years old).
Remember that this survey was conducted at the end of the recession and foreclosure crisis, when many benefits of homeownership were being called into question. This makes these results even more striking, and reinforces my findings from the first part of the study that these beliefs are deeply engrained and not greatly influenced by changing conditions, even ones that challenge the veracity of homeownership’s associations with a range of positive outcomes.
Indeed, the survey data showed that demand for homeownership remained high after the recession, with more than 80 percent of renters reporting expectations for buying a home at some point, including over three-quarters of those with incomes under $25,000, those with debt over $50,000, those requiring a lot of financial sacrifice to own, and those who think it would be difficult to qualify for a mortgage.
This research suggests some timely lessons for policymakers going forward:
First, homeownership is still widely desired by renters, whose current financial constraints are not inhibiting demand. It is therefore important that policymakers continue to prioritize making safe and affordable mortgage and home purchase options available to meet this demand.
Second, most homebuyers are strongly motivated by their beliefs that positive outcomes are associated with owning, but those outcomes are not always assured. Actions aimed at stabilizing housing markets and assisting owners in distress will be vital to ensuring that more households can realize these benefits and have successful homeownership experiences.
Finally, to help households make more informed and rational choices about their housing tenure, policymakers should consider changing policies and political rhetoric that emphasize owning and its benefits. They should recognize and acknowledge that renting has advantages, promote balanced messages that do not favor one tenure form over the other, and design new policies to support a range of options suitable to meet the diverse housing needs of all households who aspire to the American Dream.
(Photo by Jason Tester, CC BY-ND.)