Mortgage Finance, Affordable Homeownership
Published Article – Peer Reviewed | 2013

The User Cost of Low-Income Homeownership

The Journal of Regional Analysis & Policy, Vol. 43 No. 2
Sarah F. Riley, Hong Yu Ru, Qing Feng
Research funded by Ford Foundation

Researchers find that owning a home is less costly than renting a comparable property between 2003 and 2011 for low-income homeowners across the United States who obtained high-quality mortgages through a model home loan program.

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Empirical research examining whether owning a home is less costly than renting for low-income households is largely lacking.

We use detailed property information provided by a set of low-income homeowners who participated in the Community Advantage Panel Survey, along with a matched sample of similar rental properties from the American Housing Survey, to determine whether low-income homeowners in the United States would have experienced lower housing costs by renting between 2003 and 2011.

We calculate the homeowners’ user costs directly from the survey data, and we derive hedonic measures of equivalent rent for these homeowners via pooled regressions of house prices and rents on housing characteristics, from which we obtain capitalization rates.

For the median homeowner in our sample, we find that owning was less costly than renting a comparable property between 2003 and 2011.

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