Is Housing Wealth an “ATM”? The Relationship Between Household Wealth, Home Equity Withdrawal, and Saving Rates

Klyuev, Vladimir; Mills, Paul S.

doi:10.1057/palgrave.imfsp.9450018

Cited by 48 publications

(39 citation statements)

References 10 publications

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“…A second issue is the growing trend in equity borrowing À where homeowners withdraw equity across the life course, before reaching retirement age (Klyuev & Mills, 2007;Schwartz, Hampton, Lewis, & Norman, 2006;Smith & Searle, 2008). Although this is not a phenomenon experienced across all home-owning nations (Toussaint & Elsinga, 2009 (Wood, Parkinson, Searle, & Smith, 2013), leading to claims that housing wealth is being used routinely as an ATM (Klyuev & Mills, 2007) as well as funding some substantial 'one-off' or 'sustained expenditures' (Parkinson, Searle, Smith, Stokes, & Wood, 2009, p. 385).…”

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“…Although this is not a phenomenon experienced across all home-owning nations (Toussaint & Elsinga, 2009 (Wood, Parkinson, Searle, & Smith, 2013), leading to claims that housing wealth is being used routinely as an ATM (Klyuev & Mills, 2007) as well as funding some substantial 'one-off' or 'sustained expenditures' (Parkinson, Searle, Smith, Stokes, & Wood, 2009, p. 385). Equity withdrawal across the life course reduces the asset base available to homeowners to fund their welfare in older age.…”

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Property-based welfare and the search for generational equality

Searle

McCollum

2014

International Journal of Housing Policy

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In many countries, the demographic shift towards an ageing population is occurring against a backdrop of welfare state restructuring. The paradigm of asset-based welfare may become increasingly central to these developments as individualised welfare is touted as part of the response to the challenge of funding the care of an ageing population. This article focuses on the framing of housing wealth as a form of asset-based welfare in the UK context. We consider the strengths and weaknesses of housing as a form of asset-based welfare, both in terms of equity between generations and equality within them. We argue that housing market gains have presented many homeowners with significant, and arguably unearned, wealth and that policy-makers could reasonably expect that some of these assets be utilised to meet welfare needs in later life. However, the suitability of asset-based welfare as a panacea to the fiscal costs of an ageing population and welfare state retraction is limited by a number of potential practical and ethical concerns.

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Property-based welfare and the search for generational equality

Searle

McCollum

2014

International Journal of Housing Policy

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“…This can be done via transactions and/or additional borrowing (see Klyuev and Mills 2007). Households withdraw home equity e.g.…”

Section: Appendix A: Hew and Descriptive Statistics Box A1: Definitimentioning

confidence: 99%

A micro view on home equity withdrawal and its determinants: Evidence from Dutch households

Ebner

2013

Journal of Housing Economics

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Home equity is the most important part of a household portfolio, but only recently has it become more accessible through innovations in the mortgage market and financial deregulation. This study looks at the factors driving home equity withdrawal on a household level using Dutch survey data and assesses to which degree different theoretical predictions can be empirically supported. There is little evidence that equity withdrawal is used as a buffer against adverse income shocks, with financial motives and life-cycle effects likely to dominate a household's decision. Finally, the study provides first evidence of the impact of changing supply side conditions on home equity withdrawal.

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“…Housing wealth therefore permits credit constraints to be relaxed (see e.g. Hurst and Stafford (2004), Iacoviello (2004) and Klyuev and Mills (2006)). A decline in house prices reduces the amount households can borrow (through 'mortgage equity withdrawal' or MEW).…”

Section: Credit or Collateral Effectsmentioning

confidence: 99%

Housing Wealth Isn’t Wealth

Buiter

2010

Economics

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A fall in house prices due to a change in fundamental value redistributes wealth from those long housing (for whom the fundamental value of the house they own exceeds the present discounted value of their planned future consumption of housing services) to those short housing. In a closed economy representative agent model (the special case when the birth rate is zero, of the Yaari-Blanchard OLG model used in the paper), there is no pure wealth effect on consumption from a change in house prices if this represents a change in their fundamental value. When the birth rate is positive, higher fundamental house prices driven by the housing demand of future generations will boost current consumption.There is a pure wealth effect on consumption from a change in house prices even in the representative agent model, if this reflects a change in the speculative bubble component of house prices.Two other channels through which a fall in house prices can affect aggregate consumption are (1) redistribution effects if the marginal propensity to spend out of wealth differs between those long housing (the old, say) and those short housing (the young, say) and (2) collateral or credit effects due to the collateralisability of housing wealth and the non-collateralisability of human wealth. A decline in house prices reduces the scope for mortgage equity withdrawal. For given sequences of future after-tax labour income and interest rates, a fall in house prices will then depress consumption in the short run while boosting it in the long run. JEL E2, E3, E5, E6, G1

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Is Housing Wealth an “ATM”? The Relationship Between Household Wealth, Home Equity Withdrawal, and Saving Rates

Cited by 48 publications

References 10 publications

Property-based welfare and the search for generational equality

Property-based welfare and the search for generational equality

A micro view on home equity withdrawal and its determinants: Evidence from Dutch households

Housing Wealth Isn’t Wealth

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