A Capital Idea
Research and Commentary on Financial Capital and Its Impact on People and Places
April 3, 2012

New study shows homeownership stabilizes low-income neighborhoods

Homeownership has long been promoted as a way to revitalize neighborhoods and build household wealth but, in recent years, the foreclosure crisis has caused some to question the wisdom of such policies.

A new study by researchers at the UNC Center for Community Capital finds a clear link between homeownership and how low-income homeowners perceive the level of crime. Not only does homeownership lead residents to take steps to protect and secure their neighborhoods, thereby reducing crime levels, their perceptions are important because they affect residents' mental and physical health as well.

The study compares the perceptions of homeowners with renters while controlling for other factors to demonstrate that it is homeownership that makes the difference. These findings support earlier research that shows homeownership brings a wide range of social and economic benefits to low-income communities.

Results of the new study are being published this week in the American Journal of Community Psychology in an article titled "Sense of Community and Informal Social Control Among Lower-Income Households: The Role of Homeownership and Collective Efficacy in Reducing Subjective Neighborhood Crime and Disorder."

"The housing downturn and foreclosure crisis have raised questions about the role of homeownership in stabilizing low-income communities," said center research director Mark R. Lindblad, who co-authored the study with director Roberto G. Quercia and Kim R. Manturuk, senior research associate in financial services. "Our findings demonstrate that, when coupled with traditional, fixed-rate mortgages, homeownership reduces residents' perception of crime as a key problem for their neighborhood."

Mortgage crisis raises questions about homeownership benefits

Through 2012, nearly a quarter of homeowners with mortgages continue to owe more than their homes are worth, and large drops in home equity have reduced homeowners' traditional options of either selling their home or refinancing their mortgage.

Given these conditions, policies pertaining to homeownership deserve scrutiny. Some point toward federal housing policy as unwisely promoting homeownership for lower-income households. By promoting homeownership, some critics suggest that federal policy turned the American Dream into a nightmare for lower-income borrowers.

One problem with such critiques is a tendency to neglect more compelling causes of the housing downturn and foreclosure crisis, particularly the lack of financial regulation of mortgage products. An exhaustive report on the root causes of the foreclosure crisis points not toward homeownership, but rather unfavorable subprime mortgages.

A second problem is a tendency to conflate lower-income homeownership with sub-prime mortgages. Lower-income and minority families did receive disproportionally higher rates of subprime mortgages, yet it was the unfavorable mortgage terms that largely determined the higher rates of mortgage delinquency among subprime borrowers.

Research shows that low-income households with traditional, 30-year, fixed-rate mortgages can and do sustain homeownership compared to those with subprime mortgages, who are four times more likely to default. In the wake of the housing downturn and foreclosure crisis, this key distinction between mortgage lending and homeownership has been muddled by many.

Research supports policies that promote low-income homeownership

If the future of housing finance is one of large down payment requirements and constrained mortgage lending, then the coming decade is likely to be characterized by fewer homeownership opportunities in which lower-income households delay their first home purchase or opt to rent permanently.

As lower-income households remain renters for longer periods, will they feel the strong sense of community that leads their homeowner neighbors to intervene to protect and preserve order and security?

Our findings again affirm that there is something about owning a home that produces socially desirable outcomes for lower-income households.

Given this link and the fact that homeownership has traditionally driven neighborhood revitalization efforts, it is in all of our best interests to develop policies and practices that promote it.


A Capital Idea is published by the UNC Center for Community Capital as a resource for policymakers, advocates and private-sector partners interested in finding sustainable ways to expand economic opportunity to more people, more effectively.

The Center for Community Capital, based in the College of Arts and Sciences at The University of North Carolina at Chapel Hill, is the leading center for research and policy analysis on the transformative power of capital on households and communities in the United States.

UNC Center for Community Capital
(919) 843-2140


Read other center research on the social and economic benefits of home ownership:

Perception vs. Reality: The Relationship between Low-Income Homeownership, Perceived Financial Stress and Financial Hardship"

The User Cost of Low-Income Homeownership

Homeownership and Civic Engagement in Low-Income Urban Neighborhoods: A Longitudinal Analysis

Homeownership, Neighborhood Characteristics and Children's Positive Behaviors Among Low- and Moderate-Income Households

Homeownership and Wealth Among Low- and Moderate-Income Households

Read the center's new book, a primer on the U.S. housing finance system

The center's new book  tells in very-easy-to-understand terms what caused the foreclosure crisis and what research reveals about  how to rebuild a safe, sound, sustainable housing finance system. 
Learn more

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The UNC Center for Community Capital conducts research and policy analysis in the areas of mortgage finance, consumer financial services and community development finance.

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