Identifying the Benefits from Home Ownership: A Swedish Experiment

Abstract

Homeownership is widely stimulated by policy yet its economic effects are poorly understood. We exploit quasi-random variation in homeownership generated by privatization decisions of municipally-owned buildings, and use granular data on demographics, income, housing, financial wealth, and debt that allow us to construct high-quality measures of spending. Homeownership causes wealth building via house price appreciation, increases consumption, and improves consumption smoothing across time and states of the world through a collateral effect. It increases mobility for young households, who move up the property ladder, and amplifies wealth accumulation for older households, who take more risk in their financial portfolio.

Keywords: home ownership, housing wealth, marginal propensity to consume out of housing wealth, privatization of social housing

JEL Classification: D12, D31, E21, G11, H31, J22, R21, R23, R51