GGR 357 H1F Geography of Housing and Housing Policy

1
GGR 357 H1F Geography of Housing and Housing
Policy 
May 21, 2008SESSION 3 INTERGENERATIONAL
TRANSMISSION OF HOMEOWNERSHIP
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Announcements

• Course website http//individual.utoronto.ca/held
  erman/
• Text some copies left
• After this week available still at the Centre for
  Urban and Community Studies
• 455 Spadina
• By appointment with Grace Ramirez 416-978-0808
• Other bookstores have it, but not at a reduced
  price
• Final drop date (without a penalty) June 8, 2008

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Introduction

• What is intergenerational transmission?
• How does the topic fit in with this course?
• Which are the mechanisms that feed the process?
• What are the possible implications of
  intergenerational transmission of housing tenure
  for the housing market?
• Future and policy relevance

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Intergenerational transmission

• The similarity of housing tenure between
  generations of the same family

5
Intergenerational transmission and social
inequality

• Owner-occupied homes generally of better quality
  and larger
• Situated in more salubrious neighbourhoods
• Better opportunities for building up capital
  assets
• Parental homeownership influences the younger
  generations housing tenure
• Intergenerational transmission reproduces social
  inequality

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Parental homeownership

• Housing and positive child outcomes
• Education, income
• Spurious relationship through socio-economic
  status?
• Childrens well-being/ health
• Affordability
• Housing quality
• Tenure and stability
• Neighbourhood and community
• Age, poor maintenance, faulty design, air
  quality, mould growth, lead paint, corroded
  pipes, damp walls and ceilings
• Overcrowding

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Relevance for the course

• Provides additional explanation of socio-economic
  inequality between owners and renters
• Provides additional explanation of price
  fluctuations on the housing market
• Provides additional explanation of how
  demographic characteristics and individual
  circumstances and preferences are reproduced to
  create a certain demand for housing
• Stresses the relevance of (local) housing stock
  and housing market circumstances

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General understanding for intergenerational
transmission of housing tenure

• Micro-scale
• Personal characteristics
• Personal circumstances
• Personal preferences
• Macro-scale
• Local housing supply - availability
• Local housing demand - availability
• Neighbourhood dynamics
• Attainability - through socio-economic gaps
  owners and renters

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Conceptual Scheme
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Mechanisms

• Gift giving
• Bequests/ inheritance
• Transmission of personal characteristics
• Socialization
• Local housing market stock
• Housing market circumstances
• Similarities in housing market circumstances
  between generations of the same family

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Gift giving

• Money transferred, sometimes earmarked, at least
  5000 or euros
• Direct and deliberate action
• Older homeowners have equity from home and
  sometimes self-employment
• Influences transition to homeownership
• Important when house prices are high
• Occurrence 22.3 in The Netherlands
• 21 in the USA
• Access to social networks, job opportunities, and
  education not often regarded

12
Gift giving and strategizing parents

• Avoid property tax
• Avoid taxation of future inheritance
• Affect childrens housing situation, location
  (see altruism vs. exchange later on)

13
Economic approach to gift giving

• Gifts influences
• Timing of a purchase (Loan possible sooner)
• Quality of the home (Larger, better home within
  reach)
• Mortgage duration (Larger down payments)
• Positive correlation between house price
  increases and gifts are marginal households
  crowded out?
• Gifts are targeted to constrained households
  showing merit
• Regards not only the giver but also the receiver

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Sociological approach to gift giving

• Focus on motives of the giver (parent)
• Motive influences timing and magnitude of the
  gift
• Altruism (dynastic) versus exchange
  (non-dynastic)
• Gifts targeted to households showing merit
• Merit favourable job position, having children
• Exchange motive is gift still a transfer or an
  investment in self?
• Altruistic but still non-dynastic care about
  future generation, not utility for future gen.
  (e.g. pay for college education, not consumption
  goods)

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Gift giving (timing issue)
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Gift giving and inequality

• Owning parents have equity/wealth from their home
  so that they can afford to give to their adult
  children more easily than renters
• Equity consumption (for own purposes) is rare
• Older owners often have low housing costs that go
  down
• For older renters, housing costs continue to rise
  (Kendig, 1984)

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Bequests/ inheritance

• Role inheritances very minor
• Most inheritances occur when the younger
  generation is over 40. Homeownership already
  attained
• Measured together with gifts sometimes

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Transmission of personal characteristics

• Socio-economic status
• Level of education
• Self-employment
• Ability to accumulate capital
• Earnings capacity

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Socialization

• Children base expectations concerning living
  standards on their parents home situation
  (Henretta, 1984)
• Expectations, attitudes, aspirations are molded
  when adolescents in parental home
• Homeownership as a natural goal for children of
  homeowners?
• People strive to reach at least the
  socio-economic status of their parents
  (Easterlin, 1980)

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Socialization (2)

• Parents praise homeownership as a life goal
• Parents show children how to obtain a mortgage

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Socialization (3)

• Passive socialization
• Through expectations of younger generation
• Active socialization
• Through active encouragement by parents

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Socialization and measurements

• Complex nature, hard to measure
• Often referred to but never properly measured
• Assumed to have a significant effect on the
  younger generations housing tenure outcome

23
Data issue

• With gift giving and socialization, often only
  one set of parents is regarded

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Local housing market stock

• Opportunity structure
• Percentage owner-occupied homes
• High prices
• Turnover rate percentage of homes that change
  occupiers/period

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Similarities in housing market circumstances
between generations of the same family

• Distance between family members
• Same housing market circumstances?
• Living closer to home owning parents
• Living closer to renting parents
• Scale of country

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Distance to parents in the Netherlands

• Half live within 10 km of their parents
  residence
• Average 28 km
• Range 0-279 km

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Similarities in housing tenure by housing market
circumstances
Percentage homeownership among the younger
generations
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Distance to parents seems to matter

• Uniqueness of the Netherlands situation
• Limited scale of the country
• Less variety in price levels/ markets locations
  matter less?
• Interesting deliberate (gifts) versus
  coincidental (housing market circumstances)

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Personal characteristics

• Age
• (life course stage indicator)
• Gender
• (income expectations)
• Income
• (high out of pocket expenses in first few years
  of homeownership)
• Level of education
• (income expectations)

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Personal characteristics (2)

• Stable households
• (long term commitment, larger houses that are
  more suitable for families and option of pooling
  resources)

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Implications

• Gift giving is one of the most important
  mechanisms of intergenerational transmission of
  homeownership
• If gift giving mechanisms become more important
  due to limited availability for rented homes and
  rising prices of owner-occupied homes the greater
  capacity of the better off may drive up house
  prices even more

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Future and policy relevance

• Reliability on the owner-occupied segment may
  make parental gifts more important.
• Parental gifts as a temporary solution to make
  housing more affordable to (some) starters
• BUT parental gift giving creates social
  inequality
• Parental gifts may drive up house prices
• Vast majority still accumulate down payments from
  their own savings, and pooled resources
• But will this last?
• Attention for the (affordable) rented segment is
  necessary

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Future and policy relevance

• Developing homes takes a lot of time
• Temporary means subsidies for entering the
  owner-occupied segment for families that can not
  afford parental assistance? Can only help a few
  households!
• (Especially with current government budgets)
• Development of affordable rented homes still
  necessary

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Literature session 3 (todays session)

• Henretta, J.C. (1984), Parental status and
  childs home ownership. American Sociological
  Review 49, pp. 131-140.
• Jenkins, S.P. A.K. Maynard (1983),
  Intergenerational continuities in housing. Urban
  Studies 20, pp. pp. 431-438.
• Helderman, A.C. C. Mulder (2007),
  Intergenerational transmission of homeownership
  the roles of gifts and continuities in housing
  market characteristics. Urban Studies 44 (2) pp.
  231-247.

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Jenkins Maynard, 1983

• Still not much literature available on the
  relation between parents and childrens housing
  tenure
• Exacerbating socio-economic differences
• Long-term view necessary for policy analysts
• Increasing understanding underlying factors of
  housing status
• Children of 1950 owners had about 2.4 times the
  chance of themselves being owners rather than
  non-owners relative to children of 1950
  non-owners

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Jenkins Maynard, 1983

• An observed intergenerational continuity in
  tenure may be spurious to the extent that it
  simply reflects the degree to which earnings
  capacity is transmitted from parents to children

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Jenkins Maynard, 1983

• National representativeness
• Causation direct/ intervening variables/
  spurious correlation because housing status is
  correlated with earnings capacity? ? future
  research!
• No control for opportunity structure!

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Henretta, 1984

• Intergenerational transmission of homeownership
  promotes the continuation of inequality from
  generation to generation Homeownership is the
  major source of wealth accumulation
• Material aid (bequests, transfers including
  education and social networks)
• Socialization attitudes, preferences, or ways of
  acting, style of dress/ speech, aspirations,
  expectations (transmission of status)

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Henretta, 1984

• Home value more important than parental
  homeownership, but does not measure direct aid ?
• Seems to be through mortgage level
• Parental income is important, as is parental
  gifts (no measurement for income children)
• Together this seems to reflect an importance of
  socialization

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Henretta, 1984

• As with education, purchase of a home requires
  relatively large expenditures of money before the
  young person has very high earnings, and
  therefore direct parental aid may be important

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Henretta, 1984

• Multivariate (logistic) regression analysis able
  to control for many variables relating to
  personal circumstances and mechanisms
• Theoretical basis for mechanisms of transmisson
  of homeownership
• City size controlled for (proxy for concept
  opportunity structure), but not for period of
  observation
• Ethnicity ? culture/ limited opportunity
  structure/ discrimination?
• Not convincing, but mechanisms may work
  differently
• Large data sets (national) representativeness
• No direct measurement of socialization tentative!

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Literature session 4 (next Monday)

• Bryant, T. (2005), Housing as a social
  determinant of health. In J.D. Hulchanski M.
  Shapcott (eds. 2005), Finding room. Policy
  options for a Canadian rental housing strategy.
  p. 159-166.
• Murdie, R. (2005), Housing affordability
  immigrant and refugee experiences. In J.D.
  Hulchanski M. Shapcott (eds. 2005), Finding
  room. Policy options for a Canadian rental
  housing strategy. p. 147-158.
• Novac, S., J. Darden, D. Hulchanski A. Seguin
  (2005), Housing discrimination in Canada
  stakeholders views and research gaps. In J.D.
  Hulchanski M. Shapcott (eds. 2005), Finding
  room. Policy options for a Canadian rental
  housing strategy. p. 135-146.