Identifying the Benefits from Homeownership: A Swedish Experiment

Abstract

This paper studies the economic benefits of home ownership. Exploiting a quasi-experiment surrounding privatization decisions of municipally-owned apartment buildings, we obtain random variation in home ownership for otherwise similar buildings with similar tenants. We link the tenants to their tax records to obtain information on demographics, income, mobility patterns, housing wealth, financial wealth, and debt. These data allow us to construct high-quality measures of consumption expenditures. Home ownership causes households to move up the housing ladder, work harder, and save more. Consumption increases out of housing wealth are concentrated among the home owners who sell subsequent to privatization and among those who receive negative income shocks, evidencing a collateral effect.

Does Homeownership Hinder Labor Market Activity? Evidence From Housing Privatization and Restitution in Brno.

“…On the one hand, some economists suggest that homeownership is associated with positive externalities, making homeowners "better citizens" (DiPasquale and Glaeser 1999; Huber and Montag 2018). However, others have pointed out that homeownership is likely to increase the Montag 2018; Sodini, Van Nieuwerburg, Vestman, and von Lilienfeld-Toal 2016). This is where our paper adds.…”

“…Two other papers have recently used housing privatization to study the effects of homeownership on labor market activity. Sodini et al (2016) look at housing privatization within a sample of 46 buildings in Stockholm. They find that, among other things, homeownership increases labor mobility and labor income, which mostly driven by the intensive margin (harder work) accompanied by a small increase in labor participation.…”

Stock Market Returns and Consumption

“…Leth-Petersen (2010) uses Danish data (albeit at the aggregate portfolio level) to study the relation between an increase in credit supply and household expenditure. Sodini et al (2016) use Swedish data to measure the effect of home ownership, utilizing Swedish housing market reform in the early 2000s, on household consumption and savings. Fagereng, Holm and Natvik (2016) use Norwegian data to calculate the MPC out of (lottery) income for households in different parts of the wealth and income distribution.…”

Stock Market Returns and Consumption

“…Leth-Petersen (2010) uses Danish data (albeit at the aggregate portfolio level) to study the relation between an increase in credit supply and household expenditure. Sodini et al (2016) use Swedish data to measure the effect of home ownership, utilizing Swedish housing market reform in the early 2000s, on household consumption and savings. Fagereng, Holm and Natvik (2016) use Norwegian data to calculate the MPC out of (lottery) income for households in different parts of the wealth and income distribution.…”