Credit Impairment and Housing Tenure Choice
43 Pages Posted: 2 Dec 2008
Date Written: October 3, 2008
We analyze the relationship between underwriting standards and low-income homeownership rates using the 1979 National Longitudinal Survey of Youth. The survey respondents are a nationally representative sample of Americans mostly 40-48 years of age as of the most recent wave of the survey in 2004. Past research has identified credit impairment, wealth constraints, and income constraints as finance-related barriers to homeownership. Using a model of tenure choice, we find that absent all three constraints, the homeownership rate of low-income households in our sample would increase from 52.5 to 59.3 percent. Approximately half of this differential is attributable to households with impaired credit and those with 'thin-file status,' the lack of a substantial credit history.
Keywords: real estate, housing, barriers to homeownership, underwriting standards, credit history, low-income homeownership, choice of property tenure, property forms
JEL Classification: D12, K11, R20
Suggested Citation: Suggested Citation