Revisiting the Net Benefits of Freddie Mac and Fannie Mae
Promoting Important Social Goals
The benefits of the GSEs discussed thus far pertain to the reduction in homeowners’ financing costs and to increased stability in the economy. Beyond these are the significant social bene- fits of homeownership that are facilitated by the GSEs. Researchers Quercia, McCarthy and Wachter (2003) reported that GSE activities have increased the rate of homeownership, particularly for minorities and underserved populations. By promoting homeownership through their various activities in the secondary mortgage market, the GSEs contribute to social goals.
For some time it has been recognized that the decision to acquire rather than rent a home leads people to become better citizens. For example, Denise DiPasquale and Edward Glaeser (1999) found that homeowners are more likely to be civic-minded. Peter Rossi and Eleanor Weber (1996) found that homeowners are more likely to vote, read newspapers, participate in and contrib- ute money to political campaigns, and to know the names of their elected representatives.
Because their homes are their most significant assets, most owners understandably act to preserve them. Consequently, as George Galster (1983) found, they tend to spend more on maintenance. Further, according to James Shilling, C.F. Sirmans, and Jonathan Dombrow (1991), owner-occupied houses tend to depreci- ate more slowly than renter-occupied houses. As William Rohe and Leslie Stewart (1996) showed, owner-occupancy usually increases the value of the property. And, according to Dean Gatzlaff, Richard Green, and David Ling (1998), owner- occupied houses usually appreciate in value more rapidly.49
Children especially benefit from growing up in owner-occupied homes. According to Robert Sampson and Jeffrey Morenoff (2006), crime is lower in owner-occupied neighborhoods.50 As documented by Tama Leventhal and Jeanne Brooks-Gunn (2000), exposure to crime has a long-term debilitating effect on children growing up in such areas. Richard Green and Michelle White (1997) found that children growing up in owner-occupied homes are more likely to finish high school and that the difference is most notable among those with lower incomes. Donald Haurin, Toby Parcel, and Jean Haurin (2002) found that young women under the age of 18 who grow up in owner-occupied homes are less likely to have experienced pregnancy. They also found that children of homeowners do better in math and have fewer behavior problems in school.
There have been recent attempts to quantify the value to homeowners of such social benefits. Edward Coulson, Seok-Joon Hwang, and Susumu Imai (2003) questioned what one would be willing to pay to live in an owner- occupied neighborhood as opposed to a renter- occupied neighborhood of the same physical quality. The answer, based on extensive econo- metric analysis, is that on average a person would be willing to pay about $5,000 more per year to live in an owner-occupied neighbor- hood of the same physical quality. In other words, the value of the social benefits caused by home- ownership is approximately $5,000 annually. Specifically with respect to children, Green and White (1997) concluded that the expected benefit to a child growing up in an owner-occupied home is approximately $31,000.
Green (2001, 22) provides a good summary of these studies. As reported in Hoff and Sen (2005). See also, Edward L. Glaeser and Bruce Sacerdote (1999).
The Freddie Mac and Fannie Mae Contributions to National Goals