The Effect of Individual Development Accounts On Home Maintenance and Housing-Price Appreciation: Evidence From a Randomized Controlled Trial
The ability to maintain and make needed repairs to the home is important for the well-being and financial health of families. Because this ability also affects the appearance, character, and property values of the surrounding community, whether a family maintains a home can have implications for community stability and well-being. However, many low- and moderate-income households struggle to find money to maintain and repair owned homes. Using data from a randomly assigned sample, this paper assesses whether access to an Individual Development Account (IDA) program affects a household’s ability to maintain and repair a home, the frequency with which households skip necessary repair work, and the rate of home appreciation.
In 1998, households that signed up for an IDA program in Tulsa, Oklahoma, completed a baseline (Wave 1) survey and were randomly assigned to either a treatment group or an untreated control group. Those in the treatment group had access to financial education, financial counseling, and an IDA. Participants could accumulate up to $4,500 for home repair (including their savings and a savings match). Follow-up interviews were conducted at 18 months (Wave 2), 48 months (Wave 3), and 10 years (Wave 4). This study uses data from recent Wave-4 interviews (n = 855). Because the program’s effect on home maintenance is most likely to be realized among those who own homes, respondents who owned their home at baseline are examined in detail. We employ a conservative intent-to-treat approach in assessing the impact of treatment assignment. We use bivariate comparisons and regressions with control variables measured at baseline.
Overall, about 14% of treatment-group respondents make at least one matched withdrawal for home repair. In the full sample, about 68% reported making a major repair and 48% reported foregoing a needed repair since the baseline interview. Among respondents who owned their home at baseline, those in the treatment group experienced a significantly higher rate of home appreciation than those in the control group. Treatment assignment is associated with an additional $1,800 in housing-price appreciation per year. Those in the treatment group are also significantly less likely to report forgoing needed repairs since the baseline interview.
Conclusions and Implications
The unexpected expense of repairing a leaky roof can claim funds that would otherwise be spent to meet routine household needs and may impose material hardship. Thus, the ability to repair and maintain one’s home is an indicator of household economic security; inability to do so may compromise the household’s well-being. This study provides the first empirical evidence of the long-term impacts of IDA programs on home maintenance and housing-price appreciation. The results suggest that IDAs may enable homeowners to accumulate the assets needed to meet such challenges. They also suggest that IDAs may help homeowners to realize higher return on the investment. The findings suggest that the profession should consider integrating IDAs into broad efforts to ensure economic security and well-being for vulnerable families.