October 03, 2001

Eliminating Credit Barriers To Increase Homeownership: How Far Can We Go?

Stuart S. Rosenthal

Using data from the 1998 Survey of Consumer Finances (SCF), this paper estimates homeownership rates that would prevail in the United States if borrowing constraints were eliminated. These estimates are obtained by first identifying a group of unconstrained households in the SCF based on a unique set of survey questions. Housing tenure preferences are then estimated over unconstrained households controlling for sample selection effects, and results are used to forecast owner-occupancy rates that would prevail in the absence of borrowing constraints. If all borrowing constraints were removed, ceteris paribus, the owneroccupancy rate among non-farm families in the United States would increase just over four percentage points. In contrast, borrowing constraints have a comparatively small effect on the percentage of current renters who expect to own a home in the next 10 years. This pattern suggests that borrowing constraints depress owner-occupancy rates primarily by delaying homeownership rather than permanently excluding families from owner-occupied housing…

Category: Working Papers

Read More About: Housing Markets & Conditions