Ownership of a real estate asset, compared to renting it, is often associated with lower household mobility. Almost all studies on the subject conclude that owner-occupants are less in a position to change residences than are renters. The effect applies to different ages, incomes, and education. The economic reason most often advanced is that of the transaction costs with which owners are faced when they change residence. These costs are multiple: agency fees, legal fees, income tax on the capital gains, moving and decorating costs, costs to keep the property to be sold in good shape, the costs associated with bridge funding, and so on.
Another reason is that owner households may be tempted to stay in their property up to a time that its value is very high. It is an established fact, for example, that households put off the sale of their property if the drop in real estate prices makes the risk of a nominal loss possible (see experiment 24). Conversely, when the prices have gone up markedly, to move to a larger residence automatically becomes more difficult and the households may just as well prefer to delay the change of address.
Being interested in the structural and economic factors of residential mobility, Debrand and Taffin (2005)1 made a summary of the five latest surveys entitled Logement (Housing) (1984–2002) by INSEE. From variables describing the household characteristics, those of the residence, and those of the economic environment, they modeled the probability of having changed residence during the four or five years preceding a survey. The variables which describe the chosen household are the number of persons in it, whether a couple is involved, the education and age of the reference person, whether that person is employed, whether it is a two-income household (reference person and partner both employed), and finally, the household income. The variables describing the residence are type of occupancy, area, and size of the urban unit. Finally, the variables which describe the economic environment are the amount of construction over the whole period considered, the rate of unemployment, and the price index of old housing in metropolitan France* in the middle of the period. They found that the type of occupancy has a very significant effect on the propensity to have changed residence. Established owners have been distinguished from first time property owners who have very different sociodemographic characteristics and residence responsibilities. Compared to private renters, owners are the less mobile. On average, for equivalent situations, owners are more satisfied with their residence conditions than renters and occupy their residences for much longer periods. The probability that an owner changes residence in four or five years is 23 points lower than that exhibited by a renter. For the first time owner, it is only 3.4 points less than a renter. The renters of government subsidized housing are less mobile than those in the private sector but the difference is relatively small (a nonsignificant 5 percent). Lastly, the effect of ownership on long distance relocation is generally similar to that on short distance relocation. This result is in agreement with the fact that the sale and subsequent purchase of a new dwelling involves fixed costs largely higher than the variable costs tied to the actual move.
The results of this study corroborate earlier studies. Unfortunately, in each, correlated connections are put forward between the type of occupancy and the level of mobility but these connections say nothing about causality. It is difficult to know a priori if the type of ownership is the cause or the effect of a lower mobility. Someone could be motivated to stay put because he is the owner and would run into high transaction costs if he changed residence. But someone could also become an owner when he expects a long period of stability. Haurin and Gill (2002)2 showed this latter possibility in a clever manner by looking at the type of lease chosen by military personnel who know in advance their length of stay in a city. Not surprisingly, they found that the longer the military personnel expect to stay, the more it is probable that they decide to purchase a residence rather than be housed on the base.
If residence ownership really reduces mobility, then, is it possible that it also reduces the employability of owners, since a brake has been put on their ability to change geographical regions to go to start a job? This is the assertion of Oswald (1997).3 The supposition is supported by international macroeconomic data which relates a high degree of real estate ownership with a high rate of unemployment. Oswald estimates that an increase of 10 points of the degree of ownership in a country increases its rate of unemployment by 2 points. Green and Hendershott (2001)4 confirm that at the state level in the US, an increase in the rate of ownership is one of the important factors which determine changes in the rate of unemployment. Paradoxically, by microeconomic data, the relationship seems to be reversed. Homeowners have less frequent and shorter periods of unemployment than renters.
For example, Coulson and Fisher (2002)5 used data from two national studies to find out whether homeowners were more or less successful than renters in the employment market. Controlling for the usual sociodemographic variables (age, ethnic origin, marital status, number of children in the household, level of education), the authors found that the status of ownership had a negative impact on the probability of experiencing a period of unemployment, on its duration, and a positive impact on the amount of annual salary (of the order of $5,000 per year). In total contradiction with the prediction of Oswald, owners seem to be a stronger factor in the work force than are renters.
Other microeconomic studies find similar results. The authors of these studies advance the hypothesis that in fact owners would be more stimulated than renters to find a job since they have a mortgage to pay off. Other economic facts support this idea. Women who form part of an ownership household have a higher rate of employment than women renters. Young mothers who own property return to work more quickly after giving birth than young mothers who rent.
The gap between the microeconomic and macroeconomic studies is explained, perhaps, by the lack of control in the macro studies. The macroeconomic studies encapsulate total levels of homeownership without adjustment for sociodemographic variables. A simple effect of age could explain the fact that, at the individual level, owners are more often employed than renters but, at the aggregate level, the regions with a relatively older population see simultaneously a high level of ownership and a high rate of unemployment.
Finally, it is noteworthy that the higher level of activity, including employment, of owner households prevails inside the household as well. The owners do not take into account their efforts to maintain their property in good condition, decorate it to their liking, and improve it. South and Spitze (1994)6 confirm that homeownership as opposed to renting increases the work at home for married men and women, but less for the men than for the women.
In Western societies, ownership of real estate property forms part of the outward signs of social success and constitutes one of the primary goals of human life. This accomplishment produces a feeling of satisfaction with life which renters do not experience. As well, owners can obtain great satisfaction from involving themselves in the major work of fashioning their dwelling to suit their tastes. Generally, owners are more motivated to maintain and improve their residence than renters who can only experience the immediate satisfaction they derive from their residence. Studies which have looked at the differences in the degree of satisfaction in life between owners and renters confirm that owners are more satisfied than renters (Rossi and Weber, 1996).7 In a longitudinal study on low income families in Baltimore, Rohe and Basolo (1997)8 observed that, a year and a half and three years after their acquisition of property, new owners had obtained a significant enhancement in their degree of satisfaction of life.
The social status and freedom of movement associated with real estate can also bring a growth in self-esteem on the part of owners who feel a greater control over their lives. Three mechanisms can come into play to link property to self-esteem: the opinion of others, social comparisons, and a feeling of empowerment. If the opinion of others for an individual changes when he acquires property, then this development can generate a boost in self-esteem. The effect is the same if the individual himself thinks that his acquisition of property makes him a success compared to renters. To be fixed on a goal, to be in the process of achieving it, and to gain more autonomy in one’s private life are all factors which increase the perceived level of control over one’s life. The empirical data generally arrive at a positive connection between ownership of real estate and self-esteem (Balfor and Smith, 1996)9 but this connection appears to be not fully robust.
Finally, other studies (Evans, Wells, and Moch, 2003)10 have sought to assess the link between the psychological health of the occupant of a residence and the type of tenure (ownership or rental). In agreement with work already cited, these studies find better psychological health among owners than among renters.
Cairney and Boyle (2004)11 wished to see if this assertion held after distinction between owners with and without a mortgage to pay off. They studied the answers of more than 8,000 Canadians to a telephone survey conducted by social services. The variable monitored was the level of psychological distress, which was assessed from replies to the following questions:
“During the past few weeks, how often have you felt…
… very lonely or cut off from other people,
… depressed or very unhappy,
… fraught with worry,
… so restless you could not sit down and relax,
… annoyed because someone criticized you?”
To each of these questions, the subjects had to answer “never,” “sometimes,” or “often.” The answers were then coded numerically and added to give a total score which reflected the level of psychological distress. The authors then made a regression of this score of psychological distress on several variables including the type of tenure, age, marital status, household income, level of education, and level of stress felt by the individual. For equivalent situations, the renters appeared to be suffering greater distress than owners, whether with or without a mortgage. The effect of the type of tenure of the residence on psychological distress was, however, about half as important as that of marital status; the divorced and widowed, and to a lesser extent, singles feel more distress than married people. Finally, it appears that the differences in psychological well-being between the three types of residence increases with the level of stress felt. The fact of having a stressful life increases the feeling of malaise that accompanies holding a mortgage or renting a living space.
The study of Cairney and Boyle is interesting because the division of owners into those who have to pay off a mortgage and those who have already paid for their residence allows a control (indirect and approximate) of the wealth of the individuals. The fact that the positive impact of ownership on psychological well-being holds even for those with a mortgage shows, without doubt, it is not just a question of wealth. Nevertheless, other studies which directly control differences in wealth remain to be performed in order that the robustness of the relationship be confirmed.
How can homeownership impact health? One possibility would be that residences occupied by their owners are kept in a better state than those rented. In that case, it would be more the living conditions rather than the ownership which would be important. Another would be that owners have wealth and income higher than renters and would be able to use it to take better care of their health. Here too, the impact of ownership on health would only be indirect. The one direct explanation is given by Saunders (1990)12 for whom homeownership offers an “ontological security” which must have a positive impact on health by promoting a general sense of well-being.
The type of housing tenure is a variable which is often included in studies on the health of individuals without really being the main focus of the investigation. It is used more as a control variable which serves to make the impact of other variables on health clearer. These studies may tend to show that homeowners are in better physical, as well as psychological, health compared to renters, but they neglect to control for residential or neighborhood characteristics or even socioeconomic aspects, indeed for so many factors which can play a significant and confusing role.
Other studies have focused more on the influence of the type of tenure on health. They find results in agreement with the idea that ownership improves health. For example, Filakti and Fox (1995)13 observed that English homeowners have a mortality rate lower than renters. Benzeval and Judge (1996)14 find that English homeowners consult their general practitioners less than do renters. Sundquist and Johansson (1997)15 make the same statement about Swedes. But these studies too lack control for socioeconomic differences, income, or wealth thereby rendering their results not free of suspicion.
Macintyre et al. (1998)16 provide a more convincing study. They analyzed the answers of a sample of more than 1,500 inhabitants of western Scotland to a particularly detailed questionnaire on health. Half of the respondents were under 40 years of age and the other half were under 60. Their goal was to see whether ownership of real estate and a car improved health directly or only because they were approximate reflectors of income and self-esteem. Household income, adjusted for size and composition, as well the level of self-esteem were, then, control variables here. The results show in a very clear manner that after control for age, gender, and income (or level of self-esteem), the homeowners posted a better general level of health than the renters and better particular indicators (respiratory capacity, obesity, number of chronic illnesses, number of acute symptoms). Only blood pressure does not differ significantly between homeowners and renters. It is also worthy of note that ownership of a vehicle leads to identical differences in matters of health.
This study contributes a little more support to the idea that homeowners are in better health than renters and that this condition is not due strictly to income. Nevertheless, as for the other study, it lacks a control for wealth, which homeownership of real estate, among other things, infers. Neither does it differentiate between owners who have paid for their residence and those who are still in the process of doing so. With such distinction, the assertion could be modified or at least slightly altered, as is the case for psychological health. Moreover, Nettleton and Burrows (1998)17 furnish information which shows that holding a real estate mortgage can damage the health of owners who are experiencing problems in paying it off. The authors found that difficulty with monthly mortgage payments went hand in hand with poorer scores in general health and more frequent visits to a GP. This result suggests that purchase of a real estate asset has positive consequences for health, at least as long as you manage to finance it.
Residence ownership can in many ways influence the success of children of the household. If it drives the parents to expend all their efforts to maintain and constantly improve the house, the result can benefit the children both directly or indirectly if these skills are transmitted to them through a learning experience. If the owners are more concerned and more involved in the life of their neighborhood, the children are deterred from behaving in a manner which would be harmful to the direct interests of their parents. If the parents derive pride and a greater sense of self-esteem from their status as owners, they can be a better source of emotional support for the children. Green and White (1997)18 show that homeownership increased the probability that teenagers will still be in school at age 17. This probability is even greater if the parents have been long-time homeowners. The interest in these results is, however, limited by the lack of control for the wealth of the parents and the quality of the neighborhood. Aaronson (2000),19 for one, shows that the influence of ownership on the results of the children is explained in large part by the lower mobility of the households of owners which favors stability and thriving of the children. However, once this effect is taken into account, ownership continues to positively impact the scholarly success of the children, measured in this study by high school graduation rate. Using numerous controls, Boehm and Schlottmann (1999)20 confirm that the children of homeowners have more success in school and tend, more frequently than do children of renters, to be homeowners ten years after leaving the family home.
In the same vein, Haurin, Parcel, and Haurin (2002)21 conducted an extremely detailed study on 1,026 children who were followed from 1988 to 1994. The authors were interested in the performance of the children in math and reading tests and with respect to possible behavioral problems (hyperactivity, bad character, constant attention seeking, withdrawal, anxiety, and lack of attention). They tried to connect them to the type of home tenure and the number of years of a homeownership. They controlled their results with a battery of economic variables (salaries of the mother and father, supplementary income, wealth), sociodemographic variables (size of family, matrimonial history of the mother, family history of the mother, family history of the father) or variables concerning the neighborhood. They tested the influence of ownership on the scores of the children according to two methods: an indirect way through the improvement of the immediate environment of the child, and an indirect way which was not explained. By both methods, the results show an impact of homeownership on the scores of the children. Everything being equal, homeownership increases the score in mathematics by 9 percent and the score in reading by 7 percent and reduces behavioral problems by 3 percent, but not by a statistically significant amount. The influence of ownership on the success and behavior of the child increases with its duration. Each year that the parents have been owners improves the scores of their children.
Thus, the ensemble of studies concludes that there is a positive impact of homeownership on the present and future behavior of children. The most recent studies, still sparse, correct the faults of the older ones, especially the lack of control of confusing factors such as wealth and neighborhood characteristics. They argue for an influence of homeownership on children through a greater geographic stability and a better living environment.
Endnotes
1 Debrand, T., and C. Taffin, “Les facteurs structurels et conjoncturels de la mobilité résidentielle depuis 20 ans,” Économie et Statistique, n˚ 381–382, (2005): 125–146.
2 Haurin, D., and H. Gill, “The Impact of Transaction Costs and the Expected Length of Stay on Homeownership,” Journal of Urban Economics, 51, (2002): 563–584; and Rohe, W.M., and L. Stewart, “Homeownership and Neighborhood Stability,” Housing Policy Debate, 7, (1996): 173–184.
3 Oswald, A., “The Missing Piece of the Unemployment Puzzle: An Inaugural Lecture” (working paper, Department of Economics, Warwick University, 1997).
4 Green, R., and P. Hendershott, “Homeownership and Unemployment in the USA,” Urban Studies, 38, (2001): 1,509–1,520.
5 Coulson, N., and N. Fisher, “Tenure Choice and Labor Market Outcomes,” Housing Studies, 17, (2002): 35–49.
6 South, S., and G. Spitze, “Housework in Marital and Nonmarital Households,” American Sociological Review, 59, (1994): 327–347.
7 Rossi, P.H., and E.W. Weber, “The Social Benefits of Homeownership: Empirical Evidence from National Surveys,” Housing Policy Debate, 7, (1996): 1–35.
8 Rohe, W.M., and V. Basolo, “Long-Term Effects of Homeownership on the Self-Perceptions and Social Interactions of Low-Income Persons,” Environment and Behavior, 29, (1997): 793–819.
9 Balfor, D.L., and J.L. Smith, “Transforming Lease-Purchase Housing Programs for Low Income Families: Towards Empowerment and Engagement,” Journal of Urban Affairs, 18, (1996): 173–188.
10 Evans, G., N. Wells, and A. Moch, “Housing and Mental Health: A Review of the Evidence and a Methodological and Conceptual Critique,” Journal of Social Issues, 59 (3), (2003): 475–500.
11 Cairney, J., and M. Boyle, “Homeownership, Mortgages and Psychological Distress,” Housing Studies, 19 (2), (2004): 161–174.
12 Saunders, P., A Nation of Home Owners, (London: Unwin Hyman, 1990).
13 Filakti, H., and J. Fox, “Differences in Mortality by Housing Tenure and by Car Access,” Population Trends, 81, (1995): 27–30.
14 Benzeval, M., and K. Judge, “Access to Health-Care in England – Continuing Inequalities in the Distribution of GPs,” Journal of Public Health Medicine, 18, (1996): 33–40.
15 Sundquist, J., and S.E. Johansson, “Self-Reported Poor Health and Low Educational Level Predictors for Mortality: A Population Based Follow-Up Study of 39,156 People in Sweden,” Journal of Epidemiology and Community Health, 51, (1997): 35–40.
16 Macintyre, S., A. Eellaway, G. Der, G. Ford and K. Hunt, “Do Housing Tenure and Car Access Predict Health because they are Simply Markers of Income or Self-Esteem? A Scottish Study,” Journal of Epidemiology and Community Health, 52, (1998): 657–664.
17 Nettleton, S., and R.J. Burrows, “Mortgage Debt, Insecure Homeownership and Health: An Exploratory Analysis,” Sociology of Health and Illness, 20, (1998): 731–753.
18 Green, R.K., and M.J. White, “Measuring the Benefits of Homeowning: Effects on Children,” Journal of Urban Economics, 41, (1997): 441–461.
19 Aaronson, D., “A Note on the Benefit of Homeownership,” Journal of Urban Economics, 47, (2000): 356–369.
20 Boehm, T.P., and A.M. Schlottmann, “Does Homeownership by Parents Have an Economic Impact on their Children?” Journal of Housing Economics, 8, (1999): 217–232.
21 Haurin, D.R., T.L. Parcel, and R.J. Haurin, “Does Homeownership Affect Child Outcomes?” Real Estate Economics, 30, (2002): 635–666.
*France, not including overseas departments and territories.