Low-income Homeownership: American Dreamor Delusion?

Anne B. Shlay

[Paper first received, March 2005; in final form, June 2005]

Summary. This paper is a critical analysis of recent US policy to promote low-incomehomeownership. It examines the ideology and assumptions buttressing this policy, evidence onthe effects of low-income homeownership and the viability of homeownership as a strategy forlow-income families. Evidence suggests that the prospect for sustained growth in low-incomehomeownership may be limited. Research does not provide uniform support for it as a tool forasset accumulation, neighbourhood economic development or other social and politicalgoals. Alleged effects of homeownership may be artefacts of self-selection and the conflationof homeownership with unobserved characteristics coincident with buying homes. Whathomeownership does and why are not well understood because of difficulties disentangling whathomeownership means. The elevation of low-income homeownership to its current status hasdeflected political attention away from alternative policies for affordable housing.

Introduction

Since the Great Depression, the hallmark ofUS housing policy, sine qua non, has beenhomeownership (Wright, 1983; Hayden,1985; Jackson, 1985). Historical accounts ofthe initial motivations behind the push tocreate a nation of homeowners cite industrial-ists’ interest in homeownership because theyfeared communism and labour unrest(Hayden, 1981, p. 283) and the belief thatstable housing was intrinsically linked to themaintenance of a loyal citizenry (Wright,1983). But the federal government’s push forhomeownership, its subsequent interventionin housing markets and its revolutionising ofthe housing finance industry occurred in thewake of the failed US economy in the late1920s (Jackson, 1985). Homeownership

became a tool to stimulate consumption andincrease production while improving Ameri-cans’ housing conditions (Carliner, 1998).While World War II created a temporaryhiatus in the homeownership push, when thetroops came home, they were welcomedwith federally insured long-term amortisationloans—a central ingredient to the success of ahomeownership strategy (Wright, 1983).

It is not clear who pegged homeownershipas the American Dream. Homeownershippolicy, however, has not been about imagin-ing the unattainable but about creating theexpectation of owning one’s own home. Ideo-logically, homeownership has been portrayedas a political right seemingly more popularthan voting (Shlay, 1985, 1986).1 Indeed,anthropologist Constance Perin argues that

Urban Studies, Vol. 43, No. 3, 511–531, March 2006

Anne B. Shlay is in the Department of Sociology, Temple University, Gladfelter Hall, 1115 West Berks Street, Philadelphia, PA19122, USA. Fax: 215 204 3352. E-mail: ashlay@temple.edu. This paper was presented at the 2004 Annual Meeting of theUrban Affairs Association in Washington, DC (April). The author thanks the National Housing Institute for giving her the initialimpetus to think about low-income homeownership. The author is grateful to the Washington State Housing Finance Commissionand the Oklahoma Housing Finance Agency for giving her the opportunity to present these ideas at their state housing conferences.The author thanks Jenna Allen, Greg Squires, Dan Immergluck, Mickey Lauria, Vincent Louis, Peter Marcuse, Peter H. Rossi andseveral anonymous reviewers for thoughtful comments.

0042-0980 Print=1360-063X Online=06=030511–21 # 2006 The Editors of Urban Studies

DOI: 10.1080=00420980500452433

homeownership is symbolically equivalent tocitizenship—a status conveyed to the home-buyer through establishing a debt relationshipwith a bank (Perin, 1977).

Yet homeownership is also valued as thelynch pin for the maintenance and growth ofa huge housing infrastructure that includesdevelopers, the financial services industry,the real estate industry, planners, road buildersand the like. Homeownership is politicallypopular, in part, because it has a myriad ofconstituencies (Buchholz, 2002).

To be sure, homeownership is criticised forescalating suburbanisation, fostering central-city decay, promoting neighbourhood racialchange and segregation, and intensifyingenvironmental damage, pollution and waste(Squires, 1994; Wright, 1983; Hayden, 1985;Jackson, 1985; Bradford, 1979). But even itscritics fail to come up with good, feasiblealternatives given homeownership’s enor-mous popularity. In 2002, 67.9 per cent percent of US households owned their ownhomes (US Census, 2002b).

Within the US, desires for homeownershiphave been longstanding. The colonisingBritish, notes historian Kenneth Jackson(1985), quickly organised land into parcelsfor private consumption. This earliestversion of the American dream was notabout owning a home per se but aboutowning land. Owning land, however, wasnot a value indigenous to Americans; NativeAmerican Indians did not believe thatnatural resources such as land could beowned (Jackson, 1985). Detached housingdevelopment was enabled by appropriatedland from the Indians and fuelled by a stronganti-urban bias imported from England.

The post-World-War-II growth in homeown-ership has largely stemmed from housingfinance innovations directed at making thepurchase of a home possible through a rangeof guarantees, instruments and incentives aswell as increasing the supply of creditthrough the secondary mortgage market(Lea, 1996; Monroe, 2001). But the benefici-aries of homeownership have historicallybeen working- and middle-class White house-holds, rather than poor households and

households of colour (Denton, 2001). Inrecent years, this has changed. Low-incomefamilies represent a new target of homeowner-ship policy. Nationwide, low-income home-ownership is now a policy goal forgovernment at the local, state and federallevels, is claimed as an accomplishment byboth the Clinton and Bush presidencies, andis featured in television and radioadvertisements.

This paper provides a critical analysis of therecent policy shift to promote low-incomehomeownership. It examines the ideologyand assumptions buttressing this policy,evaluates evidence on the effects of low-income homeownership and assesses the via-bility of homeownership as a strategy forlow-income families.

This paper has several parts. Parts one andtwo review the rationale for low-incomehomeownership and the genesis of low-income homeownership policy. Part threeexamines trends in low-income homeowner-ship and the potential for growth in thismarket. The fourth part looks at research onthe effects of low-income homeownership.The fifth part examines characteristics ofmetropolitan housing markets that mayprevent low-income families from benefitingfrom homeownership. The final part presentsa set of possible policy alternatives toexplore for strengthening homeownershipand other housing opportunities for low-income families.

The Rationale for Low-incomeHomeownership

Within the housing field, there is a longstand-ing tradition of viewing housing as a source ofsocial problems (Dean, 1949; Hartman, 1975;Wright, 1983). Public interventions in thehousing market, including housing codes,zoning, urban renewal and slum clearance,and public housing, were based on a set ofbeliefs that poor housing caused social,psychological and behavioural problems(Glazer, 1980; Rainwater, 1980; Bellush andHausknecht, 1967; Gans, 1977; Babcock,1966). Ideologically, this was rooted, in part,

512 ANNE B. SHLAY

in an anti-urban bias suggested by leaders ofthe Chicago School of Urban Sociology whoworried about the effects of urban size,density and heterogeneity on the breakdownof social norms and community (Bassett andShort, 1980; Fischer, 1982; Baldassare, 1979;Wirth, 1969). To be sure, urbanisation andmassive immigration brought with themunhealthy and unsanitary housing conditions.But the rationale for public intervention inhousing was linked to the alleged social con-ditions and social pathologies associated withbad housing. Critics called these unsubstan-tiated links between housing and behaviourthe ‘myths of housing reform’ (Dean, 1949).

Promoting homeownership, and particu-larly low-income homeownership, is firmlyrooted in this deterministic tradition. Low-income homeownership is expected to bringwith it a wide range of social, behavioural,political, economic and neighbourhoodchanges, many due to behaviours expectedwith the economic investment that homeow-nership represents. The goals associated withlow-income homeownership are shown inTable 1.

The economic goals associated withlow-income homeownership are the mostintuitive. As with higher-income households,

proponents view low-income homeownershipas an asset-building strategy for owners tobuild up equity in their homes (Retsinas andBelsky, 2002b). In addition, low-incomehomeownership is viewed as a substituteinvestment for other types, including 401Ks,stocks and mutual funds. It is also viewed asa type of forced savings where making amonthly mortgage payment is similar toputting money in a bank, unlike with makinga rental payment. With a fixed-rate mortgage,low-income homeownership is expected tokeep housing costs more predictable.

Anticipated social changes are those thataffect family well-being because homeowner-ship is believed to give people more controlover their housing and, therefore, their lives(Rohe et al., 2002b; Rohe and Stegman,1994a, 1994b). It is also expected to providefamilies with more opportunities (Roheet al., 2002a). For adults, expected socialchanges include greater life satisfaction,increased participation in voluntary civicorganisations and improved physical andpsychological health (Dietz and Haurin,2003). Through homeownership, low-incomefamilies are expected to become healthier,happier and more involved in community.For children, homeownership is expected to

Table 1. Low-income homeownership rationales/goals

Family economic Family social Political Neighbourhood

Asset-building .Social stability ,Criminal activity .Property values

Substitute investmentfor 401Ks, stocks,trust funds, etc

.Family functioning .Political (voting)participation

.Care of property

Enforced savings .Satisfaction .Commitment toemployment

.Stability

Created ‘fixed’housing costs

.Voluntary/civicparticipation

.Tax base ,Abandonment

Children’s outcomes(cognitive andbehavioural)

.Population growth ,Graffiti, litterand other signsof decline

,Juvenile delinquency

.School attendance

.Physical and mentalhealth

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produce both positive cognitive and beha-vioural changes resulting in less juveniledelinquency and better school performance(Haurin et al., 2002).

Through a more definitive commitmenttowards place, low-income homeownershipis expected to bring with it changes in politicalbehaviour as well as changes in the local pol-itical climate (Gilderbloom and Markham,1995; Rossi and Weber, 1996; Rohe andBasalo, 1997; Heskin, 1983; Blum andKingston, 1984; Saunders, 1990). Low-income homeowners are expected to votemore than renters and to be more politicallyengaged and aware. Low-income homeowner-ship is projected to affect positively the localtax base and to spur local population growth(Rohe et al., 2002a).

At the level of the neighbourhood, low-income homeownership is expected tostrengthen local housing markets (Rohe andStewart, 1996). These homeowners areexpected to take better care of their propertythan renters and therefore create positiveneighbourhood spillovers. Presumably, prop-erty values will then rise and abandonmentand other forms of blight will decrease(Haurin et al., 2003).

TheGenesis of Low-incomeHomeownershipPolicy

Homeownership and, in particular, suburba-nised homeownership, have deep roots in theactivities of the federal government(Jackson, 1985). Yet homeownership hasbecome so entangled with American ideas ofsocial status that it is not entirely evidentwhether federal policy came to reflect prevail-ing popular culture or whether desires forhomeownership became the ideological mani-festation of these political forces. Clearly,public policy and housing preferences havebeen ‘in sync’, leading to homeownership’senormous popularity in the US.

The roots of low-income homeownershippolicy lie in the creation of the FederalHome Administration (FHA) in 1934 and thesubsequent establishment of Fannie Mae(Jackson, 1985; van Order, 2000). FHA

made homeownership possible for many UShouseholds by guaranteeing payment in theevent of default. Fannie Mae, Freddie Macand the evolving Government SponsoredEnterprise (GSE) infrastructure created a sec-ondary market for these loans. These federalinterventions in the mortgage market pio-neered innovation in mortgage instrumentsand products, expanded homeownership tothe middle class, fuelled suburbanisation andcreated what economist Michael Lea (1996)calls ‘a wonderful life’ in mortgage financewhere government propelled innovation bysharing risk with the private sector.

But the government also defined risk bydeveloping lending guidelines that made it dif-ficult, if not impossible, to make FHA-insuredloans in minority neighbourhoods, raciallychanging neighbourhoods and older neigh-bourhoods more generally. By classifyingmany urban neighbourhoods as poor risks,FHA guidelines effectively redlined cities(Jackson, 1985; Bradford, 1979; Stuart, 2003).

The civil rights movement highlightedFHA’s racial and anti-urban bias. Agitationbrought about important reforms in the late1960s. These reforms, largely through thenow-infamous 235 programme, increased theavailability of FHA finance to minority house-holds. Mortgage brokers heavily marketedFHA loans to inner-city communities usingrelaxed credit standards for minority home-buyers and massively inflated appraisals(Hays, 1993). Home improvement companies,often in partnership with mortgage compa-nies, bought older homes from the exitingWhites moving to the suburbs and sold themto minorities (a practice known as flipping).Many of these new minority homebuyerscould not afford to maintain the homes thatthey purchased (Bradford, 1979; Squires,1994). FHA reforms with flawed underwrit-ing, inflated appraisals, scandalous lendingpractices and massive foreclosures led towholesale neighbourhood devastation inmany city neighbourhoods, particularlyin Midwestern and Northeastern cities. Thealleged wonderful life in mortgage innovationbecame a death sentence for many central-cityminority neighbourhoods.

514 ANNE B. SHLAY

With the recognition that lenders wereredlining communities, a practice with rootsin the neighbourhood underwriting guidelineperpetrated by FHA, came the impetus foranother innovation in lending—communityreinvestment. The logic behind communityreinvestment was that mortgage originators,typically savings and loans institutions, hadresponsibilities to invest in communities thatwere the source of local deposits (Squires,1992). Lenders who failed to invest in com-munities from which they derived depositswere disinvesting from communities bytaking their deposits and investing them insomeone and somewhere else. An importantcontribution of the community reinvestmentmovement was the recognition of the role ofprivate investment decisions in promotingurban decay and inequality (Shlay, 1993).

Sophisticated organising led to the estab-lishment of two federal policies in responseto disinvestment, the Home Mortgage Dis-closure Act of 1975 (HMDA) and the Com-munity Reinvestment Act of 1977 (CRA).HMDA mandated lenders to report thelocation of their residential lending, permit-ting people to document where lenders weremaking loans. CRA made reinvestment afederal requirement for lenders under federalregulatory oversight (Squires, 1992).

The community reinvestment movement,however, did not advocate for low-incomehomeownership. But this movement, as itchanged form in the last part of the late 20thcentury, was highly influential in the evol-ution of low-income homeownership as adesired policy goal.

How did this happen? A variety of forcesconverged, providing the impetus to moveon the low-income homeownership frontier.These included the community reinvestmentmovement, the collapse of the savings andloan industry, a new political administrationin Washington and technological changes inunderwriting.

The merger mania and financial restructur-ing of the ‘go-go’ 1980s created opportunitiesfor Community Reinvestment Act (CRA)challenges—a regulatory moment when localcommunity groups and others could protest a

merger or acquisition based on a lender’slack of compliance with CRA mandates.This led to the negotiation of a host of CRAagreements where lenders committed largeamounts of money targeted for urban, min-ority and low-income lending (NationalHousing Conference, 2001; Squires, 1992,2003; Shlay, 1999).

During this same time-period, the collapseof many institutions within the savings andloan industry suggested that prevailing defi-nitions of risk were not firmly grounded inrealistic underwriting standards. The under-standing that loans to low-income familiesdid not cause savings and loans to fail wasaccompanied by a growing recognition thatlow-income loans were profitable and goodinsurance against loss (Listokin et al., 2002).This perceptual shift fostered a new look atthe potential low-income homebuyer.

Lenders were also seeking new markets.Changes in homeownership rates remainedflat during the late 1980s and early 1990s,hovering at around 64 per cent (Masnick,2001). Low-income homebuyers representeda new and untapped market.

Other federal policy initiatives intensifiedtheir focus on low-income homeownership.The Federal Housing Enterprises FinancialSafety and Soundness Act of 1992 establishedperformance standards for Government Spon-sored Enterprises (GSEs Fannie Mae andFreddie Mac) to make homeownership avail-able to a wider variety of households (Caseet al., 2002; Fishbein, 2003). The Departmentof Housing and Urban Development thenestablished target goals for the purchase ofloans made to low- and moderate-incomehomebuyers (less than or equal to the MSAmedian income) in central cities and tospecifically targeted lower households.2 TheGSEs were required to target the ‘under-served’ markets. Both Fannie Mae andFreddie Mac increased activities around inno-vating loan products that would help them tomeet these goals.

President Clinton also made low-incomehomeownership part of his housing agenda.He established a policy goal of increasinghomeownership to 67.5 per cent (Masnick,

LOW-INCOME HOMEOWNERSHIP IN THE US 515

2001; Bratt, 2002). As George Masnick notes,the Clinton administration set this goal andachieved it without either new funding initiat-ives or momentum from earlier trends. Thestrategy to accomplish the goal dependedheavily on boosting homeownership amonggroups with low homeownership rates andinvolved vigorously enforcing fair housingand banking laws already on the books. Bypartnering with over two dozen public andprivate organisations that serve as nationalhousing advocates, the Clinton administrationdeveloped a far-reaching programme to helpminorities and others who have been histori-cally underserved by housing markets(Masnick, 2001, pp. 7–8). In other words,low-income homeownership would be facili-tated by eliminating the barriers preventingit, many already against the law but neverenforced under previous administrations(Bostic and Surette, 2000). Clinton’s home-ownership agenda was not new policy per sealthough it gave increased emphasis to low-income homebuyers.

Technological changes also converged asfinancial and political institutions began tofocus on low-income homeownership. Boththe computerisation of the mortgage-lendingindustry along with automated underwritingcut the time and therefore the cost in under-writing, making home mortgages more acces-sible to lower-income borrowers (Lea, 1996).

Trends and Potential in Low-incomeHomeownership

During the late 1990s, low-income homeow-nership grew to such an extent that it waslabelled a boom (Belsky and Duda, 2002a).From 1993 to 2000, the number of home pur-chase loans to low-income families grew by79 per cent (Retsinas and Belsky, 2002a).Home purchases to low-income families andminorities increased more sharply than forother groups (Bostic and Surette, 2000).

The number of low-income minorityhouseholds increased by more than 800 000,representing 11 per cent of the net increasein homeowners (Belsky and Duda, 2002a).Belsky and Duda (2002a) note that

homeownership rates for low-income andminority households grew more rapidly thanfor other groups. Therefore, a surge in low-income homeownership, particularly amongminority households, constituted a significantproportion of the net growth in homeowner-ship more generally (Retsinas and Belsky,2002a).

Where have low-income buyers been pur-chasing homes? Analysis of the spatial pat-terns associated with these purchases showsthat low-income buyers have been moving toneighbourhoods in both suburbs and centralcities (Belsky and Duda, 2002a). Someresearch shows that increases in low-incomehomeownership have not been accompaniedby a reduction in racial and ethnic segregation(Immergluck, 1998). Other research showsthat, although Black homeownership increasedin neighbourhoods within more raciallydiverse communities, minority composition inthese neighbourhoods was much higher thanthe national average (Herbert and Kaul, 2005).

What are the prospects for sustaining thisgrowth? This article reports on research thatlooks at both the demand- and supply-sidepotential for low-income homeownership.

On the demand side, Eggers and Burke(1996) examined how reducing race- andincome-based disparities would affect home-ownership rates. Using simulation techniques,they suggested that policy changes to reducegaps created by race and income couldincrease low-income and minority home-ownership by the year 2000. This researcheffectively outlined the market’s responsesto policy changes around fair lending andhousing affordability introduced during theClinton years.

More recent research on the demand sidesuggests that the market for low-incomehomeownership has a limit. Looking at mort-gage instruments available to serve the low- tomoderate-income market, Listokin et al.(2002) examined how many renters couldqualify for loans given their income andassets. Using simulation techniques, thisresearch estimated the share of the rentalpopulation that could potentially reap thebenefits of these mortgage products.

516 ANNE B. SHLAY

They found that homeownership remainedunaffordable for about 80 per cent of renters.This represents 21 million renter familiesthat cannot be served by the low-incomemortgage market given the most liberal under-writing standards. Underscoring renters’ lackof assets the researchers note that

With such a trace level of assets, even a 100per cent LTV (loan to value) mortgage willnot facilitate homeownership because ofthe resources required to meet substantialclosing costs (Listokin et al., 2002, p. 493).

They suggest that additional income and assetsupplements are needed to address the renters’financial barriers to homeownership. Thisincludes assistance with housing downpay-ments (Herbert and Tsen, 2005; Herbertet al., 2005).

Some policy analysts suggest that increas-ing low-income homeownership solelythrough credit liberalisation and mortgagelending product innovation may havealready reached its limit (Carasso et al.,2005). They speculate that greater emphasisshould be placed on low-income home-owners’ housing retention and equityaccumulation.

Research shows that a large Black–Whitegap in homeownership remains. This contin-ued gap, argue some researchers, is due notto credit barriers per se but to other householdcharacteristics, indicating a limit on howmuch mortgage finance innovation canincrease minority homeownership rates(Gabriel and Rosenthal, 2005). Importantly,some researchers now argue that credit bar-riers based on discrimination or lack of infor-mation may no longer explain gaps inhomeownership rates, by income, race andethnicity (Herbert et al., 2005). Rather, theybelieve that wealth, income, human capitaland employment remain obstacles to home-ownership. This does not necessarily absolvediscrimination as an explanation in racialand ethnic gaps in homeownership rates.Rather, obstacles to homeownership may betied more to the legacy of past discriminationthat results in racial and ethnic disparities in

education, employment and human capital(Masnick, 2004).

At the same time, there are supply-side con-straints on homeownership. Research findsthat there is a lack of adequate housing unitsat affordable prices and that affordablehomes are being swallowed up by housingprice inflation and vacancies (Collins et al.,2002). Few non-mobile housing units arebeing added to the affordable housing stock.According to Collins et al.

Policymakers need to recognize the failureof filtering as a mechanism to expand thesupply of affordable homes (Collins et al.,2002, p. 198).

With the recognition that filtering may notproduce affordable homeownership opportu-nities for low-income families, research isnow examining whether manufacturinghousing (modular homes built in factories) isa reasonable homeownership option. Itsuggests that manufactured housing, underthe right conditions, would be a beneficialinvestment (Boehm and Schlottmann, 2004c).

The Effects of Low-incomeHomeownership

What does social science tell us about theimpact of low-income homeownership? Theliterature focuses on three areas of concern:the social and behavioural effects of homeow-nership; the economic returns to low-incomehomeownership; and, the impact of low-income homeownership on children.

Social and Behavioural Effects ofHomeownership

Most research on the effects of homeowner-ship, however, is not on low-income home-owners but on middle- and high-incomehomeowners. The research focus on home-owners at the higher end of the economicspectrum reflects that, by definition, themarket for homeownership has been largelythe domain of higher-income families (Roheand Stegman, 1994b).

Research on these largely middle-classhomeowners shows positive effects of

LOW-INCOME HOMEOWNERSHIP IN THE US 517

homeownership. Homeowners, comparedwith renters, have longer tenure in theirhousing and comparably less residential mobi-lity. They are more likely to maintain theirproperty and experience greater propertyvalue appreciation (Rohe and Stewart, 1996).Homeowners are also more likely thanrenters to be satisfied and to participate inpolitical and voluntary activities (Roheet al., 2002; Blum and Kingston, 1984;DiPasquale and Glaeser, 1999).

Coulson and Fisher (2002) address therelationship between homeownership andmobility directly by examining the impact ofhomeownership on labour market outcomes.Theorising that homeowners would be con-strained in their search for employmentbecause of the costs of relocation, they exam-ined employment differences in renters andowners. If homeowners are constrained, theywould be more likely to be unemployed,have longer spells of unemployment andhave lower wages than renters. To the con-trary, they found just the opposite—thatowners experienced less and shorter unem-ployment and received higher wages com-pared with renters.

Rossi and Weber (1996) address the effects ofhomeownership on social characteristics. Theyexamined a wide range of characteristics includ-ing household composition, well-being, socia-bility, marriage and the family, confidence inmajor American institutions, attitudes towardsneighbourhoods, levels of political engagementand views on various public issues. Weakalthough consistent differences were foundbetween renters and homeowners along dimen-sions of life satisfaction, self-esteem and partici-pation in community organisations. Yet for thebulk of their analyses, they found no consistentdifferences between renters and owners andconclude that “tenure status is not a line of ideo-logical cleavage in American society” (Rossiand Weber, 1996, p. 29).

These effects of homeownership, however,may be confounded by the simultaneouseffects of income, education, length of resi-dence and family life cycle (Rossi and Weber,1996; Rohe and Stegman, 1994b; Blum andKingston, 1984; DiPasquale and Glaeser,

1999). This is because homeownership maycoincide with, or be a product of, being at thestage in the family life cycle when owningone’s home is feasible and/or desirable.

Homeowners may become homeownersbecause they are ready, willing and able tostay in one housing situation for a consider-able amount of time. Therefore, these effectsof homeownership may be an artifact of ahomeowners’ self-selection process into thisform of housing tenure ((Rohe et al., 2002).Blum and Kingston note in an early study ofhomeownership that they

prefer to see homeownership as part ofcluster of reinforcing statuses and outlooksthat both sustains and creates social attach-ment (Blum and Kinston, 1984, p. 176).

In addition, Rossi and Weber (1996) foundthat, even when accounting for age andincome, there were many family and econ-omic differences between renters andowners. Correlates of homeownership arenot necessarily caused by homeownership(DiPasquale and Glaeser, 1999).

Certain behavioural and social character-istics that appear due to homeownership mayactually be due to unobserved individual orhousehold characteristics (Dietz and Haurin,2003). Dietz and Haurin (2003) discuss house-hold planning activities or labour force beha-viour associated with the goal ofhomeownership as being an antecedent, nota consequence of homeownership.

In addition, it may not be appropriate togeneralise findings about middle-incomehouseholds to behaviours of low-incomehouseholds. As noted by Rohe and Stegman(1994b, p. 155), “Social class, ecological con-ditions, or other factors may result in a verydifferent pattern of involvement amonglower-income homeowners”. The effects ofhomeownership may not be uniform acrossclasses. A report from the National HousingConference states that

whether the assumed social benefits ofhomeownership are really caused by home-ownership or rather are so strongly associ-ated with the types of families that

518 ANNE B. SHLAY

become homeowners, that one cannot trulytease them apart. And this is for all home-owners; arguably, many of the potentialbenefits of homeownership ought to belower for very low-income families thanfor higher-income families (NationalHousing Conference, 2004, p. 4).

An important study that focused directly onthe effects of homeownership on low-incomefamilies incorporated a quasi-experimentaldesign to compare social, attitudinal andbehavioural changes for a sample of recentlow-income homebuyers with a sample oflow-income Section 8 renters (Rohe andStegman, 1994a, 1994b, 1996). They inter-viewed households at three points in timeseparated by 18-month intervals. Usingmultivariate techniques that controlled forfamily, economic, social and housing charac-teristics, they examined the effects of home-ownership on changes in self-esteem andperceived control, life satisfaction, neighbour-ing, extent of organisational involvement andthe intensity of organisational involvement.They found limited although positive effectsof homeownership. Compared with low-income renters, homeowners were morelikely to increase their involvement in neigh-bourhood organisations but not in othertypes of organisations. Homeowners becamemore satisfied with their lives compared withrenters (Rohe and Stegman, 1996), This maypotentially indicate the positive influence ofhomeownership, but also the problems occur-ring with living in neighbourhoods of low-income, rental housing.

The Economic Returns to Low-incomeHomeownership

Homeownership is expected to bring econ-omic benefits to low-income families. But,as noted by Nicolas Retsinas and EricBelsky (2002a), there is not clear evidencethat homeownership delivers economic gainsto low-income households. The question iswhether homeownership is a good asset-building strategy for low-income familiescompared with renting. And the answer is,we do not know.

It is difficult to generalise about homeow-nership as an investment because the rate ofreturn depends both on the timing and placeof purchase (Belsky and Duda, 2002b). Theamount of time the property is held and thesize of transactions costs are also crucialvariables. Whether homeownership bringseconomic gains to households depends onthe timing and location of purchases.

Moreover, the pay-off from homeowner-ship may not result from the sale of one’sfirst home but from re-entering the marketand purchasing another house for a significantamount of time (Belsky and Duda, 2002b). Asa good investment strategy that pays divi-dends to homeowners, homeownership mayrequire a long-term, sustained investment inmultiple houses. While the potential risk forlow-income homeowners rests on timing asto when they enter or exit the housingmarket, it also rests on whether they canafford to continue to stay in the market for aconsiderable amount of time. According toBelsky and Duda

for those who are unable to buy again orwhose timing once again triggers a loss,homeownership can turn out to be lessthan its idealized billing (Belsky andDuda, 2002b, p. 219).

When one enters the market is critical (Caseand Marynchenko, 2002). Entering themarket at the end of a cycle of appreciationmay result in buying high, but selling low—obviously not a good situation for anyincome homebuyer. For low-income home-buyers with fewer assets, the incurred lossmay be much more deeply felt than by house-holds with more resources to fall back on.

How long someone owns the house andstays in the market is also a crucial variable.Belsky and Duda (2002b) found that manylow-income homeowners sell their homes forless than what they paid for them withoutexperiencing appreciation levels large enoughto cover the associated transaction costs.

Once becoming homeowners, low-incomehouseholds do not stay homeowners liketheir higher-income counterparts (Boehmand Schlottmann, 2004a). One study found

LOW-INCOME HOMEOWNERSHIP IN THE US 519

that low-income homebuyers returned torenting at extremely high rates, suggestingthat these households need more supportafter they purchase their homes (Reid,2004). Incorporating a longitudinal designthat followed household housing decisionsover time, Boehm and Scholottmann (2004a)found that low-income homeowners, particu-larly minority ones, were more likely torevert back to renting without ever purchasinga home again. They suggest that for low-income and minority families, homeowner-ship “may be less beneficial than it otherwisemight be” (Boehm and Scholottmann, 2004a,p. 129).

Although many low-income and minorityhomebuyers transition back from owning torenting, Boehm and Scholottmann (2004b)also find that those who remained home-owners accumulated wealth that their rentalcounterparts did not. Moreover, the wealthaccumulated from homeownership rep-resented the sole net worth of these house-holds who otherwise would be bereft ofassets. These low-income and minority home-owners who managed to buck the trend totransition back to renting experienced signifi-cant wealth benefits from homeownership.

The strength of the regional economy andlow housing market conditions are additionalcritical variables affecting the profitability oflow-income homeownership (Case andMarynchenko, 2002). It may be good to buyin the lower-priced market in Philadelphia inthe late 1980s, but not in Los Angeles in themid 1990s. Where, when and how long rep-resent the big ‘ifs’ associated with whetherlow-income homeowners will come outahead of renting.

In addition, a question is whether homeow-nership is a good investment compared withothers. Goetzmann and Spiegel (2002) arguethat homeownership may be a relativelypoor asset to invest the bulk of a household’snet worth because of its low performancecompared with other investments. Of course,the concept of an investment portfolio mayseem a bit unrealistic in the context of discuss-ing the financial well-being of low-incomehouseholds. Given, however, the precarious

financial situation of many low-income house-holds and the significance of financial loss forthem, the opportunity costs of their capitalshould be scrutinised like those of householdswith more economic resources. Examinedalong these lines, the conclusions reached byeconomists Goetzman and Spiegel in theiranalysis of housing’s economic performanceare severe.

Overinvestment in housing by families withmodest savings means underinvestment infinancial assets that will grow and provideincome for retirement. In fact, encouraginghomeownership among low-incomefamilies will only increase the wealth gapin the United States (Goetzman andSpiegel, 2002, p. 272; emphasis added).

The problem of overrelying on housing as aninvestment compared with others is com-pounded by tax issues as well. Mortgageinterest deductions are worth more to higher-income people than to low-income households(Collins et al., 1999; Carasso et al., 2005).The economic benefits from mortgage interestdeductions to higher-income householdsmean that lower-income families may bebetter off renting from higher-incomelandlords.

The continued high level of racial segre-gation in most US cities also means thatreturns to investments may be affected bywhat has long been regarded as a dualhousing market (Denton, 2001). Neighbour-hoods of Black homeowners, on average,have been found to be better than thosehousing Black renters. But the differencesbetween neighbourhoods of White ownersand White renters were much larger. There-fore, benefits accrued to White low-incomehomebuyers may be greater than thoseaccrued to Black low-income homebuyers.Both place, race and neighbourhood are vitalparts of the equation when assessing econ-omic benefits to low-income homeownership.

Is homeownership a quality economicinvestment for low-income families? Theanswer is complex. The diverse nature ofhousing markets, the leveraged nature ofhome purchases, the costs of entering and

520 ANNE B. SHLAY

leaving the homeownership market, the rate ofreturn from housing compared with otherinvestments and differential effects of taxpolicy on higher- versus lower-incomefamilies present questions as to whether low-income homeownership is a uniformly posi-tive economic investment strategy.

The Effects of Low-income Homeownershipon Children

A significant body of research demonstratespositive benefits of homeownership for chil-dren. Children in families of homeownersare more likely to have fewer emotional andbehavioural problems (Boyle, 2002), graduatefrom and perform better in school, have fewerteenage pregnancies (Green and White, 1997)and acquire more education and income(Boehm and Schlottmann, 1999). Moreover,homeowners’ children are more likely tobecome homeowners as adults, therefore con-tinuing this cycle of increased benefitsaccrued to children who live in homes theirparents own (Boehm and Schlottmann,1999). Boehm and Schlottmann (2002) showthat homeowners’ children accumulate morewealth because they are more likely to owntheir homes and acquire greater educationalcredentials. Regarding children, Green andWhite (1997) find that homeownershipbenefits lower-income families more thanhigher-income families.

Homeownership also has been found to influ-ence the cognitive and behavioural outcomes ofyoung children (Haurin et al., 2002). Childrenliving with homeowning parents tested higheron maths and reading tests. The home environ-ments of homeowners were rated higher interms of providing cognitive stimulation andemotional support for children.

Finding that homeownership influenceschild outcomes leads to more questions.How does homeownership affect children?Developmental psychologist Michael Boylesuggests that becoming a homeowner maybe as much a process as an outcome with theimplication that going through this processmay select families more likely to raise chil-dren with lower risks of emotional or

behavioural problems (Boyle, 2002). Econ-omists Boehm and Schlottmann ask “whichcomponents of owned housing make thebiggest difference for children?” (Boehmand Schlottman, 2002, p. 231). Are homeown-ing parents more vigilant in watching out fortheir children because they have an invest-ment in the neighbourhood or do better childoutcomes reflect the personal traits of home-buying parents (Green and White, 1997)?Are the skills sets associated with becomingand remaining homeowners similar to thoseassociated with being good parents (Dietzand Haurin, 2003)? Does the effect of home-ownership operate through neighbourhoods,the physical characteristics of housing orwhat? In other words, are outcomes thedirect effects of homeownership or indirecteffects that are mediated through other vari-ables?3 What are the unobserved variablesthat might explain why homeownership haspositive effects on children?

In a major effort to control for some of thepreviously unobserved variables that maymediate the effects of homeownership, pre-liminary research has replicated and extendedsome of the prior research on homeownershipand children (Barker and Miller, 2005). Itlooked at a range of child outcomes includinghigh school drop-out rates, cognitive ability,behavioural problems and ratings of thehome environment. Added control variablesincluded residential mobility, wealth,housing type and automobile ownership; theresearchers also incorporated some additionalmethodological techniques. The inclusion ofthese different measures and methods substan-tially reduced or eliminated previously foundeffects of homeownership, indicating theimportance of mediating and unobservedfactors that operate coincident withhomeownership.

Focusing specifically on low-income home-owners, one study separated the effects ofneighbourhood from homeownership per seand examined the net effects of tenure andneighbourhood conditions on adult outcomesfor children who lived with homeowninglow-income parents (Harkness and Newman,2002). They found that homeownership

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influenced positive outcomes later in lifeincluding less idleness, higher wages andlower levels of welfare receipt.

Neighborhood conditions affected the mag-nitude of this effect. Problematic neighbour-hood conditions like high rates of povertyand residential instability reduced the effectsof homeownership and, in some situations,bad neighbourhoods could produce worse out-comes for children with homeowningfamilies. Better neighbourhood conditionsincreased the positive effects of homeowner-ship. The impact of renting was less affectedby neighbourhood conditions. Therefore, thisresearch suggests that homeownership pro-duces positive outcomes but produces thelargest effects in combination with being inbetter neighbourhoods.

Expanding the analysis to compare theeffects of homeownership on children livingin high- and low-income families, Harknessand Newman (2003) found that homeowner-ship benefits lower-income children morethan higher-income children. For higher-income children, positive outcomes wereinfluenced by parent characteristics such aseducation and income, not homeownership.For lower-income children, homeownershipbrought with it benefits over and abovefamily characteristics. The difference inhomeownership effects for high- versus low-income homeowners stemmed from a prioridifferences between high- and low-incomehomebuyers. For higher-income homeowners,the alleged effects of homeownership oper-ated through, and are attributed to, parentcharacteristics.

But it is also not clear how homeownershipaffects the children within lower-incomehomeowning families. Harkness andNewman (2003) ask whether the positiveeffects of homeownership are outcomes ofthe owned status of housing and its functionas an asset or because they increase theresidential stability of households?

Research finds consistently positive effectsof homeownership on children that operatethrough adulthood, particularly for low-income children. How homeownershipworks to deliver these benefits (for example,

through family characteristics or residentialstability), however, remains undetermined.As noted by Boehm and Schlottmann

If effective housing policies are to be devel-oped, which are also cost-efficient toimplement, the intricacies of the processby which children raised in owner-occupiedhousing benefit from their environmentmust be better understood (Boehm andSchlottmann, 2002, p. 424).

Metropolitan Housing Markets andLow-income Homeownership

Within the housing literature, housing is con-ceptualised as a multidimensional phenom-enon that comprises a bundle ofcharacteristics (Shlay, 1995). The housingbundle includes features of the housing unit,neighbourhood composition (family, racialand ethnic and economic), neighbourhoodconditions, location, housing type, housingquality and access to schools, services andemployment. Housing tenure (renting orowning) is one feature of the overall housingbundle.

But tenure is highly correlated with otherhousing bundle characteristics (Shlay, 1985,1986). Owner-occupancy often coincides withbetter neighbourhood conditions and locations.Are the desired outcomes or alleged effects ofhomeownership due to ownership per se(direct effects of homeownership) or do theystem from other aspects of housing such aslocation or access to amenities?

A major question is what is being deliveredthrough homeownership? There are no ‘pure’tenure effects because of the high correspon-dence between tenure and other character-istics. In addition, the concept of ownershipper se is messy in that few households, par-ticularly low-income ones, own their unitsoutright. Ownership is mediated by financialinstitutions that underwrite the purchase ofthe home.

Two major housing market characteristicsare central variables to homeownership’sability to deliver for low-income families.These include residential location (a home’s

522 ANNE B. SHLAY

relationship with space) and financial interme-diaries (a household’s relationship withsources of housing finance). These twofactors can either undermine or support ahousehold’s opportunities for success in thelow-income housing market.

Location and Low-income Homeownership

Low-income homeownership is billed as amechanism for helping neighbourhoods. Butwhat are the risks to low-income families,compared with higher-income families,when buying into this market? Low-incomehousing is typically more available in neigh-bourhoods with poor-quality housing(Listokin and Wyly, 2000; Shlay, 1993)although many low-income homebuyers arebuying homes outside low-income neighbour-hoods (Belsky and Duda, 2002a). Low-income homebuyers face greater risks interms of costly home repairs, lower rates ofappreciation and lower-quality neighbour-hood amenities (Retsinas, 1999; Louie et al.,1998). Therefore, low-income homeowner-ship as a policy goal may move already-at-risk households to take on even more riskunder conditions of great uncertainty. It isunclear whether policy directed at helpinglow-income families should encouragepeople with the least amount of assets totake on more risk.

Low-income homeownership is also pro-moted as a tool for central-city revitalisation.Like low-income neighbourhoods, centralcities, however, may not be good locationsfor investment, particularly for low-incomefamilies. Central cities typically have poorerquality schools and services than suburbanlocations. Therefore, buying homes incentral-city neighbourhoods may not be thebest mechanism for providing low-incomefamilies with greater access to economicopportunities and upward social mobility(Rohe et al., 2002a). A study of first-time,low-income homebuyers within two heavilysubsidised Nehemiah complexes indicatedthat, although families gained better housingconditions, their new neighbourhoods hadpoorer schools and higher crime rates than

their previous ones (Cummings et al., 2002).It may not be good policy to encouragelow-income families to invest in communitieswith the least resources.

The Financial Services Industry and Low-income Homeownership

The community reinvestment movement com-bined with heightened enforcement of the FairHousing Act has helped to eliminate somecredit barriers for prospective low-incomehomeowners (Squires, 2003) althoughseveral significant ones remain (Rosenthal,2002; Brakova et al., 2003). Low-incomehomebuyers’ recognition by the financialservices industry, however, as a potentialmarket for lending has been accompanied bythe growth of a new segment of the indus-try—the subprime lending market. Thegrowth of the subprime lending market rep-resents a major shift in the housing financeindustry in the US.

Subprime loans carry higher interest ratesand fees to cover the additional risk incurredfrom making loans to borrowers with proble-matic credit ratings (Squires, 2004). Duringthe 1990s, the number of subprime loansmade in the US grew by 900 per cent (Hurdand Kest, 2003).

A subset of loans made within the subprimelending industry is termed predatory lending(Renuart, 2004). Predatory loans containexcessive terms including points and fees,poor underwriting, high and extended pre-payment penalties, flipping and repeatedfinancing, inflated house appraisals and otherillegal and deceptive practices (Hurd andKest, 2003). These loans are considered pre-datory because lenders use deception, unfairlymaking these high-priced loans to vulnerablepopulations (White, 2004). In particular, pre-datory loans, and subprime loans more gener-ally, are marketed to elderly, low-income andminority families (Stein, 2001). Subprimeloans have been disproportionately concen-trated in minority communities (Immergluckand Smith, 2004; Calem et al., 2004).

Predatory lending is a process that stripsequity from people’s homes. While

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conventional mortgage instruments are usedby households to build equity in their prop-erty, predatory lending takes equity out ofproperty in the form of excessive fees tolenders—estimated to have reached $2.1billion annually (Stein, 2001; Renuart, 2004).The estimated total cost of subprime lendingis $9.1 billion annually. This does notinclude the costs of excessive foreclosures(Stein, 2001). Research shows that subprimelending increases the number of foreclosuresin communities (Immergluck and Smith,2004).

Subprime lending in its predatory form hasdevastating consequences for households andcommunities, particularly minority, low-income and elderly ones (White, 2004). Byincreasing the number of low-income andminority homebuyers, policy is increasingthe number of households at risk of beingpreyed upon by predatory lenders. That is,policy designed to promote savings and assetaccumulation by low-income families maybe serving up potential customers for the sub-prime lending industry. A reasonable questionis whether low-income homeownership placeslow-income homebuyers at risk of havingwould-be equity in their homes strippedaway by predatory lenders.

Housing Policy Alternatives for Low-income Families

Low-income homeownership has been elev-ated to flagship housing policy status withthe goal of providing a myriad of benefitsthat include asset accumulation, social andbehavioural changes for adults and children,increased political involvement, less criminaland deviant behaviour, and neighbourhoodimprovements that contribute to urban revita-lisation. Low-income homeownership isportrayed as a policy that will help to solvecomplex social and political problems associ-ated with being low-income and as a launch-ing-pad for family socioeconomic mobility.

Yet meeting these goals for low-incomefamilies is confounded by many factors includ-ing the financial constraints on low-incomefamilies that preclude homeownership as

an option, low-income families’ rapid move-ment from owning back to renting, risks ofoverrelying on housing as an investment,negative externalities associated with thelocation of homes affordable to low-incomehouseholds and opportunistic and exploitativebehaviour by financial intermediaries.Low-income homeownership’s ability todeliver is limited precisely by the financiallyperilous situation of low-income families.With homeownership, potential low-incomehomebuyers are more at risk because theyare low-income.

To address fully the housing needs of low-income families and to provide policy thatwill enhance their opportunities in way thatwill permit social and economic advancement,policy needs to account for the multifacetednature of the housing bundle. Policy shouldnot solely work at getting families into a home-ownership situation without ensuring that it is aviable investment and is in a quality location.Housing policy should not increase risks forfamilies already at risk of a host of problems.It should work at eliminating them or at leastminimising their probability of occurring.

With these conditions in mind, this paperoffers three general policy directions forlow-income housing policy as related tohousing tenure: improve access to qualityhomeownership opportunities through pro-viding households with increased financialsupports and incorporating a place-basedstrategy; increase supports for rentalhousing; and, initiate support for housingthat incorporates alternative tenure forms toconventional renting or owning.

Improve Access to Quality HomeownershipOpportunities

Solely facilitating low-income families’access to homeownership without alteringother aspects of the housing market is unlikelyto provide many of the economic, political andsocial benefits suggested by proponents oflow-income homeownership. A successfulhomeownership strategy will require a morecomprehensive approach that works simul-taneously at improving local social and

524 ANNE B. SHLAY

physical infrastructure including schoolsand neighbourhood conditions, protectingfamilies against the exploitation of predatorylenders and breaking down barriers to theinclusion of low-income housing withinsuburban communities. Delivering on low-income homeownership means delivering onthe full set of life-sustaining housing bundlecharacteristics.

Increasing access to quality homeowner-ship opportunities may mean enlargingdirect public subsidy of low-income house-holds (Hockett et al., 2005). Deeper publicsubsidies of low-income homeownershipmay mitigate against some of the potentialrisks of investment in the low-incomehousing market while increasing opportunitiesto families who, without subsidy, would notbe able to participate (Herbert et al., 2005;Carasso et al., 2005).

Increase Supports for Rental Housing

Tenure relationships exist within the socialand political context that defines them.Federal policy supports homeownership andthis is part of the reason why homeownershipis a desirable housing tenure situation. Policy,in part, makes homeownership a preferredhousing option.

The opposite exists for renting. Fewer pol-icies support the production of rentalhousing or the inclusion of rental unitswithin local communities. To be sure, theLow Income Tax Income Housing TaxCredit (LIHTC) programme and Section 8subsidies make renting more affordable. ButSection 8 funds continue to be cut whilecomplex syndication deals required by theLIHTC do not meet massive unmet needsfor affordable units (Orlebeke, 2000) and areinefficient tools for producing low-incomehousing (Stegman, 1990).

The incentives that exist to encourage land-lords to invest in and improve rental housingpale when compared with the array of insti-tutions and supports underlying homeowner-ship. There are no special pools of capitalfor rental housing. There are few, if any, pro-grammes designed to help renters save for

their security deposits or become better consu-mers except in the context of encouragingthem to escape from renting (Sherraden,1991; Shapiro and Wolff, 2001). Zoninglaws often explicitly exclude rental housingfrom suburbs or relegate it to undesirablelocations (Shlay, 1993; Pendall, 2000;Fischel, 2004). While policy helps to makehomeownership a positive housing situation,policy helps to make renting a negativehousing situation.

Since most low-income families cannotqualify for homeownership without deep sub-sidies, an important area of exploration isdetermining how policy can support rentalhousing as a viable housing option for low-income families. Housing policy has, in part,produced a rental housing market in whichthe available housing is often undesirable.But rental housing in the abstract is not nega-tive a priori but reflects how rental units arepackaged as housing bundles.

If housing policy can render rental housingan unattractive housing option, it can also beused to make this type of housing optionmore desirable. This includes modifyingfinancial incentives for investment and main-tenance, enhancing alternative opportunitiesfor household tax benefits and savings, revita-lising communities in which rental housing islocated, altering the size and physical layoutof units, providing tenants with more controlover their housing situations and breakingdown land use barriers to including rentalhousing within more well-off communities.We also need to determine how housingsubsidies can be delivered to low-incomefamilies in a manner that neither stigmatisesthem nor isolates them within undesirablecommunities.

Providing attractive and affordable rentalhousing has been accomplished in small butsignificant ways within the non-profit sectorand community development corporations(Dreier and Hulchanski, 1993; Keyes et al.,1996). Some advocate for supporting thegrowth of this organisational infrastructurearound affordable housing through public–private partnerships and housing trust funds(Walker, 1993; Brooks, 1996; Davis, 1994).

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Initiate Support for Alternative Tenure Forms

Conceptually, alternative tenure forms do nottreat tenure as encapsulating discrete cat-egories (owning or renting) but as a variablethat can indicate different forms and degreesof ownership and control (Geisler andDaneker, 2000). Alternative tenure formstend to socialise ownership so that it isshared among a community. Within typicalconventional housing situations, a familyunit either owns the property or someonewho does not live there owns it. Alternativetenure forms involve ownership amonggroups of households or residential users.These alterative forms include limited equityco-operatives and land trusts (Miceli et al.,1994; White and Saegert, 1996).

The focus of limited equity co-operativesand land trusts is on collective asset accumu-lation and social equity. Individual householdsacquire many of the rights associated withownership including tax benefits and securehousing. With housing collectively owned,risk is shared and the economic exposure ofindividual households is held to a minimum.

Low-income Homeownership: ReasonableExpectations

Low-income homeownership has been pro-moted with the expectation that it will engendersignificant changes for families, neighbour-hoods and local housing markets. Yet we lackdefinitive evidence to substantiate these claims.

It is unclear how many low-income familieswill be able to become homeowners. Much ofthe recent increase in low-income and min-ority homeownership has been the result ofincreased enforcement within the regulatoryenvironment (for example, CRA, FairHousing Act) as well as lower interest rates,indicating pent-up demand for homeowner-ship within low-income and minority families.But whether this demand can be sustained isquestionable. On the demand side, the vastmajority of renters cannot be served by themost lenient available underwriting standardsbecause of economic problems. On the supplyside, the affordable housing stock for the

low-income homeownership market is notreadily available.

Research examining the economic returnsfrom low-income homeownership suggeststhat a myriad of factors interfere with low-income households’ ability to reap materialgains from homeownership. Timing, location,finance terms, length of ownership and otherfactors wreak havoc with whether low-income families will come out ahead or notafter becoming homebuyers. Of course, home-ownership may have positive outcomes forfamilies even if it is not always a money-making venture. But advocating homeowner-ship for families who already have fewereconomic resources seems problematic, par-ticularly if homebuyer families’ economic cir-cumstances deteriorate more than they wouldhave if they had been renting. This is a crucialarea for continued research.

Limited evidence exists on whether low-income homeowners experience social andbehavioural changes as a result of theirchanged housing circumstances. In part, ourdearth of knowledge about how homeowner-ship benefits low-income families is for meth-odological reasons; most research that looks atthe effects of homeownership cannot disen-tangle the impact of family life cycle andclass from homeownership on outcomes. Itis unclear if homeownership is a cause orconsequence of these families’ life cycle oreconomic circumstances.

A growing body of research shows thathomeownership has positive educational,social and psychological outcomes for chil-dren. Importantly, some studies show higherbenefits for lower-income children than forhigher-income children. Yet these studiesalso question how homeownership becomesmanifested as a critical variable in children’slives. It is unclear what features of thehousing bundle produce positive and thereforealso, negative consequence for children.There are many observed variables that maymore clearly produce the outcomes attributedto homeownership. Clearly, this is an areawhere substantially more work is needed.

What homeownership does and why is notwell understood because it is difficult to

526 ANNE B. SHLAY

disentangle what homeownership means.Given the multidimensional nature of thehousing bundle and the inherent inevitabilityof predictable housing bundle packaging (byrace, class, location, housing type, etc.), whatconstitutes the homeownership ‘treatment’ isnot clear. Is homeownership secure housing,more space, greater psychological well-being, better neighbourhoods, better commu-nities, the ability to be stable residentially,the accumulation of economic assets orwhat? Delineating the critical variables associ-ated with homeownership that produce par-ticular outcomes is another crucial area forresearch.

But determining how homeownershipworks on family well-being is also importantfor developing alternative housing policiesthat support low-income families. Are therefeatures of homeownership that provide posi-tive benefits that could be configured within aredefined tenure arrangement that approxi-mates renting or some other alternativetenure form to owning? That is, are there fea-tures of homeownership that could become areconstituted tenure form that would eliminatesome of the problematic aspects of eitherrenting or owning—for example, by limitingfamily economic exposure and vulnerability?Can we configure the bundle of housingcharacteristics with known beneficial conse-quences for low-income families as a policytool for supporting these families?

The elevation of low-income homeowner-ship to its current status has deflected politicalattention away from other policies for afford-able housing. As noted over 30 years ago byplanner Peter Marcuse

the stance that public policy should taketowards homeownership for low-incomefamilies lies in the possibilities of insti-tutional changes in existing tenure arrange-ments, and in the social or political, not thefinancial characteristics of homeownership(Marcuse, 1972, p. 143).

While low-income homeownership has beenthe predominant focus of housing policy forlow-income families, policies supportingpublic housing, housing vouchers and

low-income housing tax credits have beencut, battered and denigrated. By holdingcentre stage in the low-income housingpolicy debate, low-income homeownershiphas crowded out ideas about affordablehousing policy alternatives ranging from sub-sidies to co-operatives.

Many of the policy goals surroundinglow-income homeownership are framed byideological statements about homeownershipas the American Dream. But what if thesedreams are delusions? Should housing policybe the stuff of dreams or hard-nosed analysisof what works for families, communities andlocal economies?

Notes

1. In the 2000 presidential election, the votingturnout rate represented 60 per cent of regis-tered and unregistered voters (US Census,2002a). In 2000, the homeownership ratewas 67.4 per cent (US Census, 2002b).

2. Special targeted households were those eithermaking less than 60 per cent of the areamedian income or less than 80 per cent ofthe area median income and located withinlow-income neighbourhoods (Case et al.,2002).

3. Haurin et al. (2002) report that they controlledfor community factors in their analyses ofthe effects of homeownership on child out-comes. The control variables that they use(income, race, ethnicity, unemployment,poverty, crime and education), however, areaggregated at the county level—a level toolarge be a meaningful control for communitycharacteristics. They also report that thesevariables were too highly correlated to deter-mine separate effects of each variable, notsurprising given their level of aggregation.Therefore, their analysis cannot address theissue of the effects of homeownership net ofneighbourhood or community factors.

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