Is Owning a House Always Better Than Renting? New Evidence of the Quantity-Quality Trade-Off From the Housing Bust in the United States

Abstract

This paper utilizes the city-level variation in housing prices in the U.S. to test whether the effect of sibship size on firstborns' educational attainment is different for homeowner and renter households during the housing bust from 2007--12. To solve the potential endogeneity problem, we use the sex composition of the first two children in each family as an instrumental variable for the number of children. Our results indicate no quantity-quality trade-off for either homeowner or renter households during our study period. However, after we consider the effect of housing price growth, we find that a large family size is negatively associated with college enrollment of the firstborn children of homeowners living in areas with only a moderate increase or a decrease in housing prices, but this relationship becomes positive if homeowner households are located in cities with relatively high housing price growth. Again, we find no quantity-quality trade-off for renters, even after we consider local housing price growth. Our results indicate that owning a house is not always better than renting in terms of the quantity-quality trade-off, depending on changes in local housing prices.

Keywords: Quantity-quality trade-off, Housing prices, Educational attainment, United States

JEL Classification: I25, R2, J13