It Takes Two to Borrow: The Effects of the Equal Credit Opportunity Act on Housing, Credit, and Labor Market Decisions of Married Couples

Abstract

Until the 1970s, U.S. mortgage lenders commonly discounted half of the wife’s income in couples’ joint mortgage applications. This changed with the introduction of antidiscrimination legislation in the 1970s, providing a natural experiment to study the relaxation of income-related borrowing constraints. I study the effects of the reform by estimating difference-in-differences regressions and solving a simple calibrated life cycle model. I find substantial positive effects of the reform on mortgage borrowing and homeownership rates of married couples with working wives. Moreover, I find a positive effect on married womens labor force participation, which strongly amplifies the homeownership and borrowing effects.

A spouse and a house are all we need? Housing demand, labor supply and divorce over the lifecycle

“…We document that these policies have different effects on household savings and married women's labor supply, with an LTI tightening decreasing the savings and the employment rate, whereas an LTV tightening leads to an opposite conclusion. This is in line with reduced form empirical evidence showing such asymmetric responses of female labor supply (Boca and Lusardi, 2003;Bui and Ume, 2020;Bartscher, 2023).…”

“…More precisely, we lower the value λ F Y in such a way so as to decrease the homeownership rate of married couples by 10 percentage points, by the age of 25. 24 Such policies have been shown to be relevant for married couples' labor supply decisions, see for example Bartscher (2023) in the US context.…”

“…In that respect, there have been only a few papers trying to study both housing demand and the household's labor supply over the lifecycle. Noteworthy exceptions are Bottazzi et al (2007), Pizzinelli (2018) and Bartscher (2023). In a similar vein, another related contribution is Lafortune and Low (2020), who have argued for the importance of joint held assets (in particular housing) as commitment devices for intra-household specialization, in particular for secondary earners to invest in children and other public goods.…”