The Impact of Neighborhood Homeownership Rates: A Review of the Theoretical and Empirical Literature

Abstract

Interest in measuring the impact of neighborhood homeownership rates on the residents of a neighborhood and on surrounding neighborhoods is increasing. This topic is part of the growing literature in the social sciences that discusses the theory and measurement of how neighborhoods affect individuals. In this review, we report on the conceptual categorization of the types of neighborhood effects, we review the social science literature that presents theories of how neighborhoods affect the residents or surrounding areas, and we review the empirical literature that measures the size of neighborhood effects. Throughout, we highlight the impact that differences in neighborhood homeownership rates may have on the economic and social outcomes of the residents. We find numerous theories that, when applied to neighborhood homeownership rates, have rich sets of testable predictions. In contrast, we find few empirical studies of the impact of neighborhood homeownership rates. We conclude that little is known about the impact of cross-sectional or intertemporal variations in neighborhood ownership rates and a substantial amount of additional research is needed. We show that understanding the way in which neighborhood homeownership rates impact behaviors is very important to measuring the impact of public policy. Also, knowing whether neighborhood homeownership effects have a nonlinear impact is important when deciding whether public policy should encourage clusters of homeowners.

Keywords: Neigborhood effects, homeownership, spatial effects, house prices

JEL Classification: R21, R00, J10, D71, D1