Homeownership and Social Capital in New Zealand

Abstract

Does homeownership affect individual social capital and thereby influence local outcomes? Following DiPasquale and Glaeser, a body of literature suggests that homeownership is positively related to social capital formation. Homeowners have an incentive to engage in the local community in order to preserve or enhance the value of their housing asset. Moreover, homeownership creates barriers to geographic mobility, which increases the present value of the expected stream of benefits from local community social capital. We test the homeownership hypothesis alongside other individual, household and locational determinants of social capital using unique data created by merging the 2006 and 2008 samples of the New Zealand Quality of Life survey. The measures of social capital used in our analysis include trust in others, participation in social networks, attitude towards local governance and sense of community. Since homeownership is not randomly assigned, we complement our regression models with propensity score matching to control for selection effects. The results confirm that homeownership exerts considerable positive impact in the formation of social capital in New Zealand communities. In raising accountability of local government it does, however, lead to reduced satisfaction by homeowners in the performance of local councils.

Keywords: Social Capital, Homeownership, New Zealand, Matching Methods

JEL Classification: Z13, H54, R11