This paper studies the economic benefits of home ownership. Exploiting a quasi-experiment surrounding privatization decisions of municipally-owned apartment buildings, we obtain random variation in home ownership for otherwise similar buildings with similar tenants. We link the tenants to their tax records to obtain high-quality information on demographics, income, mobility patterns, housing wealth, financial wealth, and debt. This data allow us to construct high-quality measures of consumption expenditures. Home ownership causes households to move up the housing ladder, work harder, and save more. We find little effect for a housing collateral effect, whereby home owners who stay in place tap into their home equity to boost spending. Spending only increases for those who move and realize the capital gain embedded in their house. For this group, the marginal propensity to consume is large.
Authors:
Ulf von Lilienfeld-Toal (University of Luxembourg), Paolo Sodini (Stockholm School of Economics), Stijn van Nieuwerburgh (NYU), Roine Vestman (Stockholm University)
Discussant:
Aleksandra Rzeznik (WU Vienna University of Economics and Business)