Exiting Homeownership: The Influences of Transfers on Exits from Owner-Occupied Housing in the United States

Transcription

1 Exiting Homeownership: The Influences of Transfers on Exits from Owner-Occupied Housing in the United States University of Wisconsin-Madison IRP Seminar, March

2 Outline

3 Exiting Do Subsidies/Transfers Help? 1999 to 2009 data to estimate the probability of exiting homeownership. Examine whether public and private transfers are associated with homeownership retention. Assess differential influences of these factors for various demographically defined subgroups of homeowners.

4 Looking Back Historically ownership is a means for building wealth : expansion Income relatively flat; home equity used for consumption 2006: rising defaults - lending driven 2008: more defaults - unemployment & negative equity driven

5 Measuring the Impacts of Federal and State Policies on the Ability of Vulnerable Populations to Retain Owner-Occupied Housing and on Child Maltreatment 1 How do income support policies help families maintain their homes? 2 Are child neglect and maltreatment reports more likely before, during, and after families enter the judicial foreclosure process? 3 Are payment problems associated with health and social indicators, as well as negative family events and child misbehavior? 4 Does housing and economic distress result in exacerbated crowding, poorer housing quality and/or multigenerational living?

6 Homeownership Exits Using Secondary Homeownership expansion - particularly for lower-income families (Belsky, 2008) Since 2007, that trend has reversed Significant drop in black and minority wealth (Kochhar et al., 2011) Great Recession characterized by widespread unemployment, job loss, and earnings declines (Elsby et al., 2010) Associated with large increases in public social welfare benefit take-up rates (Moffitt, 2012) To date, a limited number of studies have addressed the effects of the housing crisis on residential instability and (involuntary) exits from homeownership.

7 US Homeownership Rates

8 US Foreclosures

9 U.S. Unemployment Rates by Race/Ethnicity,

10 Foreclosures Correlated with Unemployment

11 U.S. Public Benefit Participation Trends Means-Tested Benefits Source: Moffitt, 2012

12 U.S. Public Benefit Participation Trends - Universal Benefits Source: Moffitt, 2012

13 Research Document the extent to which homeowners exited owned housing (to a rental or rent free unit) between 1999 and Examine how receipt of public and private transfers are associated with exiting (or retaining) homeownership. Can transfers counteract earnings drops to assist homeowners in retaining their homes? Investigate heterogeneity of effects by income, race and family structure.

14 Research Housing policies often considered separately from broader social welfare policy Yet housing accounts for as much as half of consumption for LMI families. Income support policies are not housing policies, per se, but may assist families in retaining current housing. Mortgage nonpayment is related to low or falling incomes...transfers replace lost wages or free up income for payments: Food support Refundable tax credits Disability insurance Workers compensation Unemployment insurance

15 Other Research Few studies have addressed non-housing policies influence on exits from ownership Haurin and Rosenthal (2004; NLSY ) show homeownership instability in 80s and 90s Reid (2004; using PSID ) shows low-income and minority homeowners more likely to exit homeownership Boehm and Schlottman (2004) and Haurin and Rosenthal (2004) show low-income and minority homeowners are more likely to return to renting and less likely to purchase a subsequent home. Still Preliminary: start to understand stability of homeownership during the 2000s including the boom and bust

16 Panel Study of Income Dynamics (PSID) Longitudinal panel study that began with a nationally representative sample of 4,800 U.S. families in 1968 Offspring and new household members continuously added to the sample Annual interviews from , biennial thereafter Detailed information on employment, income, wealth, housing, debt, family structure/composition, program participation

17 Sample Restrictions 9,737 individuals from Heads and wives who owned their housing unit at some point between 1999 and 2009 Between ages 18 and 59 years old in their sample entry year Individuals entered our sample as owner (first observed owning) Excluded any observation in which the individual had missing data on tenure, earnings, or transfers Stacked panel" consisting of 40,465 individual-interview wave observations

18 Most Homeowners Remain Owners Full Sample Always Owned Exited mean mean mean Homeownership; Always owned Exited ownership Out-of-state move Underwater (home loan > mortgage; lagged) First-time homeowner (lagged) Observations Source: PSID Household-Year Sample

19 Selected Descriptives Full Sample Always Owned Exited mean mean mean White Black Hispanic Age 18 to Age 26 to Age 36 to Age 46 to High school education More than high school education Earnings Any transfers to others Married Single Cohabiting Number of children in household Head of household or wife in poor health Household has health insurance coverage Observations

20 Leavers versus Stayers (20.8% of person-periods leave) Younger More likely to be minority Lower education Lower earnings More likely to be single Less likely to have health insurance coverage All consistent with earnings variability.

21 Specification Y i,t = α i,t + β i,t (DEMO) + ψ i,t (HCD) + λ i,t (TRANS) + δ i (STATE) + γ t (YEAR) + ω i + ɛ i,t Y i,t = 1 if individual i did not own his or her home in time t DEMOS is a vector of earnings and other sociodemographic characteristics HCD is a vector of housing characteristics and consumer debt measures TRANS is a vector of public and private transfer measures STATE fixed effects YEAR fixed effects) ω is individual fixed effect ɛ robust standard errors with intra-cluster correlation correction OLS linear probability models

22 DEMOs Y i,t = α i,t + β i,t (DEMO) + ψ i,t (HCD) + λ i,t (TRANS) + δ i (STATE) + γ t (YEAR) + ω i + ɛ i,t Age Education Household earnings Family structure Number of children and number of adults Moved to a different state Head or wife in poor health Household has health insurance coverage

23 HCD Y i,t = α i,t + β i,t (DEMO) + ψ i,t (HCD) + λ i,t (TRANS) + δ i (STATE) + γ t (YEAR) + ω i + ɛ i,t Monthly housing payment-to-income ratio (PTI) Consumer debt-to-annual income ratio (DTI) First-time homeowner Home value Time in housing unit First homeowner x time in housing unit ALL lagged prior period

24 TRANSFERS (head or wife received) Y i,t = α i,t + β i,t (DEMO) + ψ i,t (HCD) + λ i,t (TRANS) + δ i (STATE) + γ t (YEAR) + ω i + ɛ i,t Means-tested transfers (13.5% of leavers) UI Workers compensation Veterans benefits OASDI (though only survivor and disability benefits are relevant for our sample) Universal transfers (19.3% of leavers) SSI SNAP TANF or other cash assistance Private transfers (22.1% of leavers) Child support Help from relative or nonrelative

25 Approach Estimates for any transfer in 3 broad categories Universal transfer Means tested transfer Private transfer Estimates for each type of transfer observed Also control for benefit amounts (recall also controlling for earnings so should pick up replacement of earnings) All include time varying controls (not shown) Fixed effects - OLS Linear Probability (probit/logit results similar)

26 Table: Percent Receiving Transfers Full Sample Always Owned Exited mean/sd mean/sd mean/sd Transfers Any means-tested transfers (0.269) (0.244) (0.342) Any universal transfers (0.385) (0.382) (0.395) Any private transfers (0.342) (0.317) (0.415) Any SSI (0.098) (0.088) (0.131) Any SNAP (0.216) (0.179) (0.311) Any TANF/other cash assistance (0.169) (0.165) (0.183) Any UI (0.260) (0.255) (0.277) Any Workers compensation (0.133) (0.131) (0.140) Any veterans benefits (0.143) (0.147) (0.129) Any OASDI (0.278) (0.277) (0.283) Any child support (0.237) (0.214) (0.305) Any relative or non-relative (0.279) (0.257) (0.345) Observations

27 Probability of exiting homeownership (1) (2) (3) (4) Means-tested transfers (0.007) (0.005) Universal transfers (0.004) (0.002) Private transfers (0.005) (0.003) SSI (0.020) (0.015) SNAP (0.011) (0.029) TANF/other cash assistance (0.008) (0.005) UI (0.006) (0.004) Workers compensation (0.010) (0.006) Veterans benefits (0.013) (0.006) OASDI (0.007) (0.003) Child support (0.009) (0.006) Relative or non-relative (0.006) (0.004) Constant (0.187) (0.187) (0.187) (0.187) Total Observations 40,465 40,465 40,465 40,465 Transfer indicators Yes No Yes No Transfer amounts (LN; $1000s) No Yes No Yes p < 0.05, p < 0.01, p < Demographic, Housing, Debt controls and State Fixed Effects

28 Overall (recall mean exit rate is 20.8) Means-tested transfers appear to be a signal of economic distress associated also with exiting ownership. 2.8 percentage point increase in exits. SNAP strongly signals transitions out of owning; lessened when amount is included Universal benefits associated with 2.2 point decrease in exits Workers compensation and OASDI associated with protective effect No effects for private transfers

29 Table: Probability of exiting homeownership , by income quartile 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile Means-tested transfers (0.012) (0.013) (0.013) (0.009) (0.014) (0.009) (0.010) (0.007) Universal transfers (0.009) (0.005) (0.008) (0.004) (0.008) (0.003) (0.008) (0.003) Private transfers (0.011) (0.009) (0.009) (0.005) (0.009) (0.005) (0.010) (0.005) Constant (0.582) (0.582) (0.409) (0.410) (0.370) (0.371) (0.282) (0.283) Total Observations 10,172 10,172 10,928 10,928 10,257 10,257 9,108 9,108 Transfer indicators Yes No Yes No Yes No Yes No Transfer amounts (LN; $1000s) No Yes No Yes No Yes No Yes p < 0.05, p < 0.01, p < Demographic, Housing, Debt controls and State Fixed Effects

30 Table: Probability of exiting homeownership , by income quartile 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile SSI (0.037) (0.029) (0.021) (0.021) (0.019) (0.012) (0.018) (0.006) SNAP (0.014) (0.034) (0.022) (0.068) (0.033) (0.116) (0.048) (0.151) TANF/other cash assistance (0.020) (0.014) (0.016) (0.009) (0.014) (0.009) (0.010) (0.007) UI (0.012) (0.010) (0.010) (0.007) (0.010) (0.006) (0.010) (0.005) Workers compensation (0.022) (0.014) (0.013) (0.010) (0.024) (0.012) (0.019) (0.006) Veterans benefits (0.027) (0.021) (0.029) (0.016) (0.021) (0.007) (0.023) (0.010) OASDI (0.015) (0.006) (0.015) (0.006) (0.011) (0.004) (0.013) (0.005) Child support (0.019) (0.016) (0.016) (0.010) (0.017) (0.012) (0.016) (0.011) Relative or non-relative (0.012) (0.010) (0.010) (0.006) (0.011) (0.006) (0.013) (0.006) Constant (0.582) (0.582) (0.407) (0.409) (0.371) (0.371) (0.279) (0.282) Total Observations 10,172 10,172 10,928 10,928 10,257 10,257 9,108 9,108 Transfer indicators Yes No Yes No Yes No Yes No Transfer amounts (LN; $1000s) No Yes No Yes No Yes No Yes Joint significance (p-value): Benefit receipt p < 0.05, p < 0.01, p < Demographic, Housing, Debt controls and State Fixed Effects

31 By Income Quartile Universal benefits, particularly OASDI, are protective for all but the top income quartile 2.0 to 3.1 percentage points reduction in exits for lowest OASDI and Workers compensation again protective at least for lowest quartile OASDI has broadest reach up income ranges; up to 5 point reduction in exits Means tested transfers especially SNAP signals distress No private transfer effects Joint test of coefficients consistent with benefits mattering more at lower incomes, as would be expected

32 Table: Probability of exiting homeownership , by race White Black Means-tested transfers (0.008) (0.005) (0.013) (0.014) Universal transfers (0.005) (0.002) (0.009) (0.005) Private transfers (0.006) (0.003) (0.011) (0.010) SSI (0.024) (0.021) (0.030) (0.022) SNAP (0.019) (0.057) (0.015) (0.048) TANF/other cash assistance (0.008) (0.004) (0.022) (0.016) UI (0.006) (0.004) (0.011) (0.009) Workers compensation (0.011) (0.006) (0.020) (0.013) Veterans benefits (0.017) (0.007) (0.025) (0.018) OASDI (0.008) (0.003) (0.014) (0.006) Child support (0.010) (0.007) (0.017) (0.014) Relative or non-relative (0.007) (0.004) (0.013) (0.013) Constant (0.205) (0.206) (0.204) (0.206) (0.584) (0.585) (0.584) (0.583) Total Observations 27,650 27,650 27,650 27,650 9,137 9,137 9,137 9,137 Transfer indicators Yes No Yes No Yes No Yes No Transfer amounts (LN; $1000s) No Yes No Yes No Yes No Yes Joint significance (p-value): Benefit receipt p < 0.05, p < 0.01, p < Demographic, Housing, Debt controls and State Fixed Effects

33 By Race Universal benefits are more protective for Black race than White - twice the magnitude UI and OASDI are more protective for Blacks Means tested transfer especially SNAP signals distress for Whites But for Whites, VA and even Child Support are modestly protective Suggesting heterogeneity in effects we can explore Still marginal effects appear small relative to mean exit rate for single head of household very similar

34 Overall Relatively limited effects on homeownership retention Universal and more generous benefits are associated with home retention mainly OASDI Means-tested and less generous benefits are not Estimates are relatively small in magnitude Universal benefits are most protective for lower income (& also more vulnerable to shocks) Private transfers do surprisingly little

35 Implications Income programs do influence homeownership retention, at least slightly Bottom line: housing subsidies are scarce and rationed Income supports are more easily applied for and are more flexible Tend to be too shallow relative to earnings losses and are short in duration Perhaps support for proposals to link UI payments to housing subsidies (WI-FUR)

36 Limitations We focus on tenure exits not foreclosures Small number of actual foreclosures in PSID Benefits are incomplete in PSID Lack EITC, CTC, etc Use SIPP? data to capture recession... Very preliminary results suggest same patterns Applicability to renters? (depends on outcomes) State benefit generosity variations? Omitted variables (time varying) local housing & employment trends Identification strategy confounded by trigger events Eligibility? 2SLS to predict benefits? Exploit state policy variations?

37 Probability of exiting homeownership SIPP Below 150% of poverty Any private transfers (0.005) (0.005) Any means-tested transfers 0.012*** 0.012*** (0.002) (0.002) Any universal transfers * * (0.002) (0.002) Amounts No Yes Total Observations 55,244 55,244 + p < 0.1, p < 0.05, p < 0.01, p < Individual Fixed Effects

38 Probability of exiting homeownership SIPP Below 150% of poverty Any SNAP 0.012*** 0.013*** (0.002) (0.002) Any TANF 0.081*** 0.081*** (0.008) (0.008) Any SSI (0.003) (0.003) Any Social Security * * (0.003) (0.003) Any UI (0.002) (0.002) Any Workers compensation *** *** (0.007) (0.007) Any other welfare (0.008) (0.008) Any retirement benefits (0.005) (0.005) Any veterans benefits (0.011) (0.011) Any help from relative or non-relative (0.005) (0.005) EITC receipt (0.002) Child care credit receipt (0.061) Amounts Yes Yes Total Observations 55,244 55,244 + p < 0.1, p < 0.05, p < 0.01, p < Individual Fixed Effects

39 SIPP Transfer Amounts

40 Future work On deck: Geocoding Examine differential responses in public benefits between states across time periods Better estimate how negative income shocks (unemployment, job loss, earnings declines) might be moderated by subsequent receipt of income support Explore sub-group effects Refine identification strategy Replicate with SIPP (2008 panel) Wisconsin foreclosure records match to administrative data

41 Center for Financial Security Focus on financial capability and decision making for vulnerable households Applied research and outreach 40+ affiliates Funding from SSA, Treasury, Annie E Casey and others Events Research Workshop June 4-6 in Madison Assets Conference September in Washington DC 2014 IRP-CFS Savings and Asset Building Policy Conference Outreach: Monthly webinars

42 Ongoing s Foreclosure counseling studies Foreclosure policy natural experiments Access to savings accounts and financial education for 5 th graders Financial coaching evaluation(s) Financial counseling & accounts in NYC jobs program Subprime automobile loan with payment rewards VITA field studies on savings Financial capability for helping-professionals

43 Acknowledgments John D. and Catherine T. MacArthur Foundation Grant 2010 Institute for Research on Poverty Jon Latner Chris Reynolds YoungWook Lee David Chancellor