For nearly three decades, the U.S. Department of Housing and Urban Development has sponsored initiatives to promote homeownership as a wealth-building activity for low-income families. However, the value of homeownership for low-income families has been the subject of considerable scholarly and policy debate – a debate that reopened with the foreclosure crisis and collapse of the U.S. housing market in 2008. Concerns imply that low-income homebuyers, particularly minority homebuyers, make significant tradeoffs in terms of housing and neighborhood quality.
Does pre-purchase counseling make homeownership a more viable option for low-income families? Limited research to date suggests that it may but few evaluations of homeownership counseling programs have utilized control groups or other statistical techniques that make it possible to reliably estimate program effects. Using longitudinal data from the Denver Housing Authority’s HomeOwnership (HOP) program, this study assesses the impact of HOP participation on housing and neighborhood quality. Additionally, the study will examine variations in program effects for Latino and African American low-income homebuyers.
Administrative data from the Denver Housing Authority’s are used to estimate the housing and neighborhood quality of 437 Latino and African American public housing residents who purchased homes between 1994 and 2012 – 282 of whom participated in HOP. Propensity score analysis using one-to-one nearest neighbor matching techniques was employed to match program compliers and non-compliers on a common set of program characteristics (DHA housing program assignment, duration in program) and participant characteristics (age, educational attainment, gender, immigrant status, marital status, family size, and earnings at time of home purchase). The impact parameter used is the average treatment effect on the treated (ATET), estimated by a difference in means across matched samples.
While both program compliers and non-compliers saw improvements in their housing and neighborhood quality compared to when they were renting, there were several significant differences in program effects for Latino and African American low-income homebuyers. Compared to non-HOP homebuyers, Latino HOP homebuyers were less likely to purchase homes in the Denver suburbs but were more likely to live in residential neighborhoods that had better upkeep of home exteriors and yards. African American HOP homebuyers moved from more affluent renter neighborhoods to some of the newer neighborhoods in metro Denver that also had higher vacancy rates. All these impact parameters proved statistically greater than zero at the .01 significance level.
Conclusions and Implications
Low-income homeownership does not have to become the “American nightmare” for Latino and African American families. These families often can find improved housing and neighborhood quality relative to their renting. Pre-purchase homeownership counseling can improve outcomes regarding housing and neighborhood quality although access to these programs is limited. Given homebuyer concerns about upkeep of properties and neighborhood quality, post-purchase homeowner counseling may be warranted.