Did Housing Policies Cause the Postwar Boom in Home Ownership?

Matthew Chambers, Carlos Garriga, Don E. Schlagenhauf

Chapter in NBER book Housing and Mortgage Markets in Historical Perspective (2014), Eugene N. White, Kenneth Snowden, and Price Fishback, editors (p. 351 - 385)
Conference held September 23-24, 2011
Published in July 2014 by University of Chicago Press
© 2014 by the National Bureau of Economic Research

After the collapse of housing markets during the Great Depression, the U.S. government played a large role in shaping the future of housing finance and policy. Soon thereafter, housing markets witnessed the largest boom in recent history. The objective in this chapter is to quantify the contribution of government interventions in housing markets in the expansion of U.S. homeownership using an equilibrium model of tenure choice. In the model, home buyers have access to a menu of mortgage choices to finance the acquisition of a house. The government also provides special programs through provisions of the tax code. The parameterized model is consistent with key aggregate and distributional features observed in the 1940 U.S. economy and is capable of accounting for the boom in homeownership in 1960. The decomposition suggests that government policies have had significant importance. For example, the expansion in maturity of the fixed-rate mortgage to 30 years can account for 12 percent of the increase.

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This chapter first appeared as NBER working paper w18821, Did Housing Policies Cause the Postwar Boom in Homeownership?, Matthew Chambers, Carlos Garriga, Donald E. Schlagenhauf
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