The Sustainability of Homeownership: Factors
Affecting the Duration of Homeownership and Rental Spells
(December 2004, 68p)
The nation’s homeownership rate is affected by both
the length of time that households remain as homeowners rather
than reverting to being a renter and the length of time households
rent or live with their parents following the termination
of a period of homeowning. Thus, differences in ownership
rates between whites, African Americans, and Hispanics could
be due, in part, to differences in their durations of owning,
renting, and living with parents. Studies of this issue have
been piecemeal, with none being comprehensive. The analysis
presented here reveals that it is not true that “once
an owner, always an owner”. Also, the rate of exiting
from homeownership differs substantially by race and ethnicity
of the owner. There has been little recognition that post-ownership
minorities are particularly unlikely to return to homeownership.
This study uses a national data set (the National Longitudinal
Survey of Youth-NLSY) that follows a cohort of individuals
for 21 years. Their residence histories are tracked, measuring
the time spent in each type of tenure. This data set provides
extensive information about the socio-demographic characteristics
of individuals, allowing one to study the determinants of
the length of an ownership spell, or a rental spell. The data
are weighted to make the sample nationally representative.
The analysis begins by distinguishing between the length
of stay in a particular dwelling and the duration of stay
in one or more owned homes. All existing published studies
focus on the length of stay in a dwelling (either owner or
rented), or on the time to mortgage default. These studies
focus on the time spent in a particular dwelling unit, not
the length of time in a particular “state of the world”
such as owning or renting. While these studies are of interest
for some questions, they do not provide the needed information
to determine whether different lengths of continuous spells
of owning or renting contribute to racial gaps in homeownership
rates.
The empirical analysis in this study consists of two parts.
The first presents descriptions of ownership and rental spells,
focusing on differences by race, ethnicity, and income. The
second part is a formal econometric analysis of spell length,
identifying which factors contribute to lengthening spells
of owning and which ones contribute to reducing spells of
renting or living with parents that follow spells of ownership.
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