Racial Differences in the Total Rate of Return on Owner-Occupied Housing

57 Pages Posted: 1 Oct 2024

See all articles by Rebecca Diamond

Rebecca Diamond

Stanford University

William Diamond

University of Pennsylvania - Finance Department

Date Written: August 29, 2024

Abstract

We quantify racial differences in the total rate of return on housing in a nationally representative sample of homeowners from 1974-2021. We develop a new method to estimate the rental value of each owner-occupied house, using a house's resale value to proxy for unobservable quality. Black and Hispanic homeowners earn higher but more volatile rates of return than White homeowners, due in part to higher rental yields. These differences are largely explained by household income and education differences. Including returns on properties that do not transact in sample is crucial to accurately measure racial differences in total rates of return.

Suggested Citation

Diamond, Rebecca and Diamond, William, Racial Differences in the Total Rate of Return on Owner-Occupied Housing (August 29, 2024). The Wharton School Research Paper, Available at SSRN: https://ssrn.com/abstract=4940670 or http://dx.doi.org/10.2139/ssrn.4940670

Rebecca Diamond

Stanford University ( email )

Stanford, CA 94305
United States

William Diamond (Contact Author)

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

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