Does Homeownership Improve Personal Wellbeing?

Abstract

Does homeownership help people become better citizens, parents and neighbours? Advocates for promoting homeownership claim: “ownership is consistently linked to improved life outcomes for individuals as well as to more cohesive communities” (Skilling 2004). Benefits may include better health and educational outcomes, greater security and independence, and more political and social participation (New Zealand Government 2006; Skilling 2005; DiPasquale and Glaeser 1999). International studies have found that higher levels of homeownership are associated with a variety of positive outcomes (for example, Rossi and Weber 1996; Rohe and Stegman 1994).

However, there is conflicting evidence on whether homeownership has a positive impact on mental and physical health and there is evidence that homeownership can be damaging for groups with declining health and those with an uncertain ability to make mortgage payments (Nettleton and Burrows 1998; 2000).

This paper uses longitudinal data from nine waves of the nationally representative Household Income and Labour Dynamics of Australia (HILDA) survey to examine the causal relationship between homeownership and a number of measures of personal wellbeing. In particular, we examine the impact of being a homeowner on life satisfaction, financial satisfaction, satisfaction with family relationships and mental health. As HILDA follows all original sample members regardless of whether they have moved to other residences in Australia and collects detailed information about their current housing circumstances, we are able to estimate fixed effects regression models that allow us to control for unobservable differences in individuals that are related to both homeownership and personal wellbeing. This modelling approach allows us to potentially identify the causal relationship between homeownership and personal wellbeing.

Our main analysis focuses on longitudinal samples of households that have maintained the same composition (‘single’ versus ‘couple’) over multiple waves of HILDA while potentially changing homeownership status. This allows us to isolate the impact of homeownership from the impact of changes in relationship status, which are often correlated. For these samples, we estimate three specifications of fixed effects models; a first that controls for no other covariates, a second which controls for household composition at a disaggregated level (e.g. the number of adult, children and the average ages of both adult and children), and a third which also controls for adult labour force status and total household income, which are potentially correlated with changes in homeownership status and personal wellbeing.

We then extend this analysis along a number of dimensions. First, we examine whether changes in homeownership have differential effects on individuals who also change couple status at the same time. Second, we examine the impact of time in a particular dwelling on personal wellbeing. Third, we examine whether the relationship between homeownership and wellbeing varies with the amount of housing debt. Fourth, we examine whether there is an interaction between effect size and personality. Fifth, we quantify the extent to which any measured effects operate through intermediate variables, such as changes in marital status, number of children, labour force participation, and household income.