1 ggr 357 h1f geography of housing and housing policy may 21, 2008 session 3 intergenerational...
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GGR 357 H1F
Geography of Housing and Housing Policy
May 21, 2008SESSION 3
INTERGENERATIONAL TRANSMISSION OF HOMEOWNERSHIP
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Announcements
Course website: http://individual.utoronto.ca/helderman/
Text: some copies left After this week available still at the Centre for Urban
and Community Studies – 455 Spadina– By appointment with Grace Ramirez: 416-978-0808
Other bookstores have it, but not at a reduced price
Final drop date (without a penalty): June 8, 2008
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Introduction
What is intergenerational transmission? How does the topic fit in with this course? Which are the mechanisms that feed the process? What are the possible implications of intergenerational
transmission of housing tenure for the housing market? Future and policy relevance
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Intergenerational transmission
The similarity of housing tenure between generations of the same family
Younger generation = homeowner
Grown up in owner-occupied home 63%
Grown up in rented home 26%
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Intergenerational transmission and social inequality
Owner-occupied homes generally of better quality and larger
Situated in more salubrious neighbourhoods Better opportunities for building up capital assets Parental homeownership influences the younger
generation’s housing tenure Intergenerational transmission reproduces social
inequality
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Parental homeownership
Housing and positive child outcomes – Education, income– Spurious relationship through socio-economic status?
Children’s well-being/ health– Affordability– Housing quality– Tenure and stability– Neighbourhood and community– Age, poor maintenance, faulty design, air quality, mould
growth, lead paint, corroded pipes, damp walls and ceilings– Overcrowding
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Relevance for the course
Provides additional explanation of socio-economic inequality between owners and renters
Provides additional explanation of price fluctuations on the housing market
Provides additional explanation of how demographic characteristics and individual circumstances and preferences are reproduced to create a certain demand for housing
Stresses the relevance of (local) housing stock and housing market circumstances
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General understanding for intergenerational transmission of housing tenure
Micro-scale– Personal characteristics– Personal circumstances– Personal preferences
Macro-scale– Local housing supply - availability– Local housing demand - availability– Neighbourhood dynamics– Attainability - through socio-economic gaps owners
and renters
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Conceptual Scheme
Parents’ housing tenure Younger generations’ housing tenure
Exacerbation of social inequality
(demand)
Socio-economic gaps between renters and
owners
Housing and neighbourhood
quality
Housing market circumstances
(supply)
Personal characteristics and circumstances
Macro level: opportunities and constraints
Micro level: resources and restrictions
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Mechanisms
Gift giving Bequests/ inheritance Transmission of personal characteristics Socialization Local housing market stock Housing market circumstances Similarities in housing market circumstances between
generations of the same family
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Gift giving
Money transferred, sometimes earmarked, at least $5000 or euros
Direct and deliberate action Older homeowners have equity from home and
sometimes self-employment Influences transition to homeownership Important when house prices are high Occurrence 22.3% in The Netherlands 21% in the USA
Access to social networks, job opportunities, and education: not often regarded
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Gift giving and strategizing parents
Avoid property tax Avoid taxation of future inheritance Affect children’s housing situation, location (see
altruism vs. exchange later on)
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Economic approach to gift giving
Gifts influences: Timing of a purchase (Loan possible sooner) Quality of the home (Larger, better home within reach) Mortgage duration (Larger down payments)
– Positive correlation between house price increases and gifts: are marginal households crowded out?
– Gifts are targeted to constrained households showing merit
Regards not only the giver but also the receiver
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Sociological approach to gift giving
Focus on motives of the giver (parent) Motive influences timing and magnitude of the gift Altruism (dynastic) versus exchange (non-dynastic) Gifts targeted to households showing merit Merit: favourable job position, having children Exchange motive: is gift still a transfer or an
investment in self? Altruistic but still non-dynastic: care about future
generation, not utility for future gen. (e.g. pay for college education, not consumption goods)
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Gift giving (timing issue)
Parental gift Homeownership younger generation
Offer of home on the market?
Interest to buy? May influence
timing of gift or even occurrence of
gift…
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Gift giving and inequality
Owning parents have equity/wealth from their home so that they can afford to give to their adult children more easily than renters
Equity consumption (for own purposes) is rare Older owners often have low housing costs that go
down For older renters, housing costs continue to rise
(Kendig, 1984)
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Bequests/ inheritance
Role inheritances very minor Most inheritances occur when the younger generation
is over 40. Homeownership already attained Measured together with gifts sometimes
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Transmission of personal characteristics
Socio-economic status Level of education Self-employment Ability to accumulate capital Earnings capacity
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Socialization
Children base expectations concerning living standards on their parents’ home situation (Henretta, 1984)
Expectations, attitudes, aspirations are molded when adolescents in parental home
Homeownership as a ‘natural goal’ for children of homeowners?
People strive to reach at least the socio-economic status of their parents (Easterlin, 1980)
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Socialization (2)
Parents praise homeownership as a life goal Parents show children how to obtain a mortgage
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Socialization (3)
Passive socializationThrough expectations of younger generation
Active socializationThrough active encouragement by parents
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Socialization and measurements
Complex nature, hard to measure Often referred to but never properly measured Assumed to have a significant effect on the younger
generation’s housing tenure outcome
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Local housing market stock
Opportunity structure
– Percentage owner-occupied homes– High prices– Turnover rate: percentage of homes that change
occupiers/period
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Similarities in housing market circumstances between generations of the same family
Distance between family members Same housing market circumstances? Living closer to home owning parents Living closer to renting parents Scale of country
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Distance to parents in the Netherlands
Half live within 10 km of their parents’ residence Average: 28 km Range: 0-279 km
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Similarities in housing tenure by housing market circumstances
Parents own Parents rent
Within 10 km 79.1% 60.2%
Over 10 km 67.5% 67%
Percentage homeownership among the younger generations
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Distance to parents seems to matter
Uniqueness of the Netherlands situation Limited scale of the country Less variety in price levels/ markets: locations matter
less? Interesting: deliberate (gifts) versus coincidental
(housing market circumstances)
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Personal characteristics
Age (life course stage indicator)
Gender (income expectations)
Income (high out of pocket expenses in first few years of homeownership)
Level of education (income expectations)
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Personal characteristics (2)
Stable households (long term commitment, larger houses that are more suitable for families and option of pooling resources)
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Implications
Gift giving is one of the most important mechanisms of intergenerational transmission of homeownership
If gift giving mechanisms become more important due to limited availability for rented homes and rising prices of owner-occupied homes the greater capacity of the better off may drive up house prices even more
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Future and policy relevance
Reliability on the owner-occupied segment may make parental gifts more important.
Parental gifts as a temporary solution to make housing more affordable to (some) starters
BUT: parental gift giving creates social inequality Parental gifts may drive up house prices Vast majority still accumulate down payments from
their own savings, and pooled resources But will this last…? Attention for the (affordable) rented segment is
necessary
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Future and policy relevance
Developing homes takes a lot of time Temporary means: subsidies for entering the owner-
occupied segment for families that can not afford parental assistance? Can only help a few households!(Especially with current government budgets)
Development of affordable rented homes still necessary…
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Literature session 3 (today’s session)
Henretta, J.C. (1984), Parental status and child’s home ownership. American Sociological Review 49, pp. 131-140.
Jenkins, S.P. & A.K. Maynard (1983), Intergenerational continuities in housing. Urban Studies 20, pp. pp. 431-438.
Helderman, A.C. & C. Mulder (2007), Intergenerational transmission of homeownership: the roles of gifts and continuities in housing market characteristics. Urban Studies 44 (2) pp. 231-247.
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Jenkins & Maynard, 1983
Still not much literature available on the relation between parents’ and children’s housing tenure
Exacerbating socio-economic differences Long-term view necessary for policy analysts Increasing understanding underlying factors of housing
status Children of 1950 owners had about 2.4 times the
chance of themselves being owners rather than non-owners relative to children of 1950 non-owners
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Jenkins & Maynard, 1983
“An observed intergenerational continuity in tenure may be spurious to the extent that it simply reflects the
degree to which earnings capacity is transmitted from parents to children”
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Jenkins & Maynard, 1983
National representativeness Causation: direct/ intervening variables/ spurious
correlation because housing status is correlated with earnings capacity? future research!
No control for opportunity structure!
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Henretta, 1984
Intergenerational transmission of homeownership promotes the continuation of inequality from generation to generation: Homeownership is the major source of wealth accumulation
Material aid (bequests, transfers including education and social networks)
Socialization: attitudes, preferences, or ways of acting, style of dress/ speech, aspirations, expectations (transmission of status)
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Henretta, 1984
Home value more important than parental homeownership, but does not measure direct aid
Seems to be through mortgage level Parental income is important, as is parental gifts (no
measurement for income children) Together this seems to reflect an importance of
socialization
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Henretta, 1984
“As with education, purchase of a home requires relatively large expenditures of money before the young person has very high earnings, and therefore direct parental
aid may be important”
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Henretta, 1984
Multivariate (logistic) regression analysis: able to control for many variables relating to personal circumstances and mechanisms
Theoretical basis for mechanisms of transmisson of homeownership
City size controlled for (proxy for concept opportunity structure), but not for period of observation
Ethnicity culture/ limited opportunity structure/ discrimination?
Not convincing, but mechanisms may work differently Large data sets: (national) representativeness No direct measurement of socialization: tentative!
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Literature session 4 (next Monday)
Bryant, T. (2005), Housing as a social determinant of health. In: J.D. Hulchanski & M. Shapcott (eds. 2005), Finding room. Policy options for a Canadian rental housing strategy. p. 159-166.
Murdie, R. (2005), Housing affordability: immigrant and refugee experiences. In: J.D. Hulchanski & M. Shapcott (eds. 2005), Finding room. Policy options for a Canadian rental housing strategy. p. 147-158.
Novac, S., J. Darden, D. Hulchanski & A. Seguin (2005), Housing discrimination in Canada: stakeholders views and research gaps. In: J.D. Hulchanski & M. Shapcott (eds. 2005), Finding room. Policy options for a Canadian rental housing strategy. p. 135-146.
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