Personal Finance: Owning a home is good for you—and society
Owning a home is the classic American dream, and the economic benefits of homeownership are immense. Instead of paying rent to the man, you are buying something of your own that, like fine wine, may appreciate in value over the years. But there's more to owning a home than just your personal profit.
There are many ways in which homeownership is good for society. Among them:
Kids do better. The children of owners are more likely to graduate from high school than the children of renters. Owners' daughters are also less likely to become teen mothers. Researchers are not sure why this is so, but Joseph Harkness, an associate research scientist at the Institute for Policy Studies at John Hopkins University, says one plausible reason is stability: Homeowners are more stable residents, and stability is good for kids. Nearly one third of renters changed locations from 2002 to 2003, while only 7.4 percent of owners moved. "If you have a stake in the community, it probably does rub off on your kids," says Richard Green, professor of real estate and finance at George Washington University. "They're going to think there's something worthwhile to finishing school."
Communities prosper. Homeownership gives individuals an incentive to invest in their local communities. Owners are more likely to vote in local elections, attend church, volunteer, and join nonprofessional organizations. "If one believes that knowledgeable civic participation—voting, participating in local decision making—improves community quality, then homeowners seem more likely to both participate and to know about their community," says Edward Glaeser, professor of economics at Harvard University and director of the Taubman Center for State and Local Government.
Homeowners also take better care of their homes than renters and are more likely to garden. Owners remain in their homes longer than renters, so they have a much greater financial stake in their neighborhoods and will reap the financial gains of any appreciation in real estate. A large portion of the beneficial social effects of homeownership may be from the effects of staying in the same community for extended periods of time.
It's healthier. There is some evidence that homeowners report higher self-esteem and happiness than renters and even better physical health. "Homeowners tend to stay put longer, so they create more friendships and associations in the local neighborhood," says William Rohe, professor of city and regional planning at the University of North Carolina. "People have more extensive social support systems, and that has a potential positive impact on health." Part of the psychological comfort of owning a home is the option of tapping into housing equity in case of health emergencies. However, those positive effects can be lost if the owner is having difficulty meeting mortgage payments.
How far and wide these positive benefits extend is unclear. Researchers do not know whether the positive associations of homeownership are a function of actual homeownership and stable housing or a factor of the higher income and higher education that many homeowners have. Homeowners' health can deteriorate rapidly if they fall behind on mortgage payments and their stress levels rise. Also, low-income homeowners can become tied to communities that have been hit with economic distress. As more lower-income people buy homes, many of them "are really going to be at the financial edge, and the social impact of home owning may be somewhat different for them," says Rohe.