What Drives Decisions to Rent Versus Own?
Decisions to own rather than rent a home are influenced by many factors, including some that are being overlooked, according to findings in a new report from the Joint Center for Housing Studies at Harvard University.
In a working paper, post-doctoral fellow Rachel Bogardus Drew discusses various drivers of housing tenure decisions. She notes economists tend to focus on financial factors such as user costs and return on investment. Conversely, she reports, sociologists are inclined to emphasize lifestyle factors such as family status and mobility.
"Overlooked in most prior research on housing tenure (i.e., whether to own or rent) are the effect of individual beliefs about the benefits of homeownership on such decisions," Drew writes. "How do our expectations of outcomes associated with homeownership influence a desire to own?" she asks.
Using renters ages 25-64, Drew examines whether their stated beliefs of homeownership can predict their intentions to purchase a home in the future.
While most of the demographic and economic conditions considered in the analysis are strongly correlated with intentions to buy, the findings show they are less predictive that stated beliefs in the benefits of homeownership. According to Drew's research, renters who hold strong beliefs in the financial and lifestyle benefits of owning have between 1.7 and 3.8 times higher odds of wanting to buy in the future, regardless of the individual characteristics.
In her 29-page report titled "Believing in Homeownership: Behavioral Drivers of Housing Tenure Decisions," Drew suggests the results of the analysis "have important implications for both policy and research on housing tenure." She also notes further research will be needed to assess the enduring effect of beliefs and tenure decisions during economic and housing market cycles.