Homeownership Offers Social and Economic Benefits

A study conducted by the UNC Center for Community Capital finds what New Century IDA has been promoting all along. Homeownership brings a wide range of social and economic benefits to low income communities.

Even though homeownership has long been thought of as a way to revitalize neighborhoods and build household wealth, the foreclosure crisis has caused some to question this in recent years. But this new study confirms that homeownership offers many benefits to a community.

For example, there is a clear link between homeownership and how low income homeowners perceive the level of crime in their community. Homeownership leads residents to take steps to protect and secure their neighborhoods which reduces crime levels. 

Mark R. Lindblad, the center research director, stated that “The housing downturn and foreclosure crisis have raised questions about the role of homeownership in stabilizing low- income communities. Our findings demonstrate that, when coupled with traditional, fixed- rate mortgages, homeownership reduces residents’ perception of crime as a key problem for their neighborhood.” Perceptions of crime are important because they affect residents’ mental and physical health.

Homeownership has faced critiques amidst the mortgage crisis, and some critics have said federal housing policy has unwisely promoted homeownership for lower- income households. However, there are several problems with this critique. One problem is that it neglects more compelling causes of the housing downturn and foreclosure crisis, particularly the lack of financial regulation of mortgage products. The root cause of the foreclosure crisis was not homeownership, but unfavorable subprime mortgages.

The second problem is the tendency to conflate lower- income homeownership with sub- prime mortgages. While lower- income and minority families did receive disproportionally higher rates of subprime mortgages, the unfavorable mortgage terms were largely to blame for the higher rates of mortgage delinquency among subprime borrowers. Research has found that low- income households with traditional, 30 year, fixed rate mortgages do sustain homeownership.

Since its beginning in 1999, New Century IDA has promoted homeownership as a means to build wealth and break the cycle of poverty. This study conducted by UNC affirms that homeownership does produce socially desirable outcomes for lower- income households. The study concludes that it is in everyone's best interest to develop policies and practices that promote homeownership.

For further reading, results of the study can be found in the article "Sense of Community and Informal Social Control Among Lower- Income Households: The Role of Homeownership and Collective Efficacy in Reducing Subjective Neighborhood Crime and Disorder" published in the American Journal of Community Psychology.