Returns to Homeownership and Inequality: Evidence from the First-Time Homebuyer Tax Credit

65 Pages Posted: 1 Sep 2023

See all articles by Marina Gindelsky

Marina Gindelsky

Government of the United States of America - Bureau of Economic Analysis (BEA); George Washington University - Department of Economics

Jeremy Moulton

University of North Carolina, Chapel Hill - Dept. of Public Policy

Kelly Wentland

George Mason University - Department of Accounting

Scott Wentland

Bureau of Economic Analysis (BEA)

Date Written: August 31, 2023

Abstract

Homeownership is often promoted as a key to building wealth and a pathway to reducing wealth inequality across racial groups in the U.S. The prior two decades, however, saw a housing bubble form and burst with significant impacts on homeownership rates and returns, which varied by race. In this paper, we examine 1) how returns to homeownership differ by race using address-level microdata over this period, and 2) whether a policy defraying upfront costs among more liquidity constrained buyers, the 2008-10 First-time Homebuyer Tax Credit (FHTC), altered this broader dynamic. To answer these questions, we employ a unique national dataset linking internal American Community Survey (ACS) households to transactions from Zillow’s ZTRAX database for 2000-2016. Empirically, we exploit the FHTC setting using a difference-in-differences framework, finding that income-eligible homebuyers had substantially higher gross capital gains on their homes compared to ineligible households. While minority householders realized lower returns to housing over the broader boom-bust-recovery period, the FHTC results show eligible Black householders who purchased a home during the relevant policy period significantly outperformed White householders.

Keywords: inequality, housing, home prices, homeownership, wealth, race, wealth gap

JEL Classification: D31, G50, J15, R30, R38

Suggested Citation

Gindelsky, Marina and Gindelsky, Marina and Moulton, Jeremy and Wentland, Kelly and Wentland, Scott, Returns to Homeownership and Inequality: Evidence from the First-Time Homebuyer Tax Credit (August 31, 2023). George Mason University School of Business Research Paper, Available at SSRN: https://ssrn.com/abstract=4558301 or http://dx.doi.org/10.2139/ssrn.4558301

Marina Gindelsky

George Washington University - Department of Economics ( email )

Washington, D.C., DC
United States

Government of the United States of America - Bureau of Economic Analysis (BEA) ( email )

1441 L Street NW
Washington, DC 20910
United States

Jeremy Moulton

University of North Carolina, Chapel Hill - Dept. of Public Policy ( email )

Abernathy Hall
Chapel Hill, NC 27599-3435
United States

Kelly Wentland

George Mason University - Department of Accounting ( email )

Fairfax, VA
United States

Scott Wentland (Contact Author)

Bureau of Economic Analysis (BEA) ( email )

1441 L Street NW
Washington, DC 20910
United States

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