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Benefits of Homeownership

  1. Academic research and surveys point to one inescapable conclusion: that owning one’s home enhances quality of life in a variety of specific, verifiable ways:[1]
  • The U.S. Department of Housing and Urban Development says studies have shown that “homeowners accumulate wealth as the investment in their homes grows, enjoy better living conditions, are often more involved in their communities, and have children who tend on average to do better in school and are less likely to become involved with crime.
  • Increases in:
    • Graduation rates.
    • Children’s good health.
    • Net family wealth.
  • Decreases in:
    • Children’s behavioral problems.
    • Reliance on government assistance.

 

  1. Homeownership leads to better health:
  • “A safe, decent, affordable home is like a vaccine,” Dr. Megan Sandel of the Boston University School of Medicine testified to Congress in 2007. “It literally prevents disease. A safe home can prevent mental health and developmental problems, a decent home may prevent asthma or lead poisoning, and an affordable home can prevent stunted growth and unnecessary hospitalizations.”
  • Poor housing conditions contribute to asthma and other physical illnesses. Decent, affordable housing can help children with asthma address their health needs, according to a report by the Center for Housing Policy.
  • Children of homeowners are significantly more likely to stay in school until age 17 than children of renters, especially in low-income households, according to a study in the Journal of Urban Economics.

 

  1. Homeownership builds wealth:[ii]
  • Homeownership is a valuable institution. On average, it allows families to build wealth and serves as a measure of financial security.
  • For a homeowner, a home is both a place to live and an investment. Under certain conditions, the net present value of the cash flows from owning a home, versus renting for a given holding period and investing the down payment, should be the same. These conditions include: no uncertainty about home prices and rents; a deterministic rate of inflation which affects both home prices and rents; no tax advantages to home ownership; known costs of home maintenance, property taxes, and insurance; no difference between home price appreciation, mortgage rates, and returns on other investments; a known holding period, and zero transactions costs to move between the purchase and rental decision.

 

  1. Homeownership offers some financial advantages over renting:[iii]
  • Homeownership offers some financial advantages over renting. Making regular payments on an amortizing mortgage is a “forced savings” mechanism, meaning that homeowners are paying down debt and accumulating equity with each payment. (During the first few years of mortgages, most of the monthly payment applies to interest owed rather than principal.)
  • By contrast, rent payments only cover the consumption value of housing and do not accumulate savings. Owning one’s home also provides greater stability and predictability of housing expenditures than renting.
  • For the typical U.S. homeowner with a 30-year fixed rate mortgage, the greatest portion of monthly housing costs remain fixed over a very long term. Renters only know their monthly housing costs for the duration of their current lease, most commonly one year.
  •  Predictable housing expenditures translates into greater housing stability for owners relative to renters. Moving to a different home is expensive and disruptive, especially for families with school-age children.

 

  1. Additional Resources: