Measuring the External Benefits of Homeownership
Posted: 1 Dec 2010
Date Written: November 29, 2010
We use panel data, endogenous switching and instrumental variables to assess the externality value of neighborhood home-ownership. Using the cluster samples of the 1985, 1989 and 1993 American Housing Survey, we find some variation in the estimate of this value, depending on the assumptions made about the unobservable neighborhood and unit attributes. The most reliable estimates suggest that the externality value of ownership is approximately $1000/year, exceeding the deadweight loss of the mortgage interest tax deduction for all but the highest income households.
JEL Classification: R5
Suggested Citation: Suggested Citation