How Do Mortgage Subsidies Affect Home Ownership? Evidence from the Mid-century GI Bills

Daniel K. Fetter

NBER Working Paper No. 17166
Issued in June 2011
NBER Program(s):   DAE

The largest 20th-century increase in U.S. home ownership occurred between 1940 and 1960, associated largely with declining age at first ownership. I shed light on the contribution of coincident government mortgage market interventions by examining home loan benefits granted under the World War II and Korean War GI Bills. The impact of veterans' housing benefits on home ownership is positive for young men, and declines with age. Veterans' benefits increased aggregate home ownership rates primarily by shifting purchase earlier in life, explaining 7.4 percent of the overall 1940-60 increase and 25 percent of the increase for affected cohorts. A rough extrapolation suggests that broader changes in mortgage terms may explain 40 percent of the 1940-60 increase.

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This paper was revised on August 15, 2012

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