Homeownership and the American Dream - An Analysis of Intergenerational Mobility Effects

Abstract

The benefits of homeownership feature prominently in the academic literature and policy discussion alike. Increasing homeownership has been a major policy goal in the US for decades, especially in low-income areas. We show that the positive relationship between homeownership and intergenerational mobility is highly place-dependent. First, we link commuting zone-level homeownership rates to intergenerational mobility, and find a strong positive relationship. The relationship persists after instrumenting for ownership using housing supply and price shocks. Second, we show that the positive relation between of homeownership and upward mobility is significantly diminished, or disappears, in areas with high sprawl or segregation, whether we use income segregation, racial segregation, or a new measure of homeowner segregation. These results, as well as additional findings on the formation of social capital and on school quality, suggest that homeownership may not benefit, or even disadvantage children in segregated, poor areas, possibly through reduced residential mobility.