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12.20.21

Is Homeownership the Solution to Wealth Inequality?

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Homeownership presents an opportunity to accumulate wealth, making it an appealing vehicle for reducing wealth inequality. In this Economic Commentary, Cleveland Fed researchers Daniel Carroll and Ross Cohen-Kristiansen show that the benefits and risks of homeownership are not distributed uniformly across households: The benefits tend to favor those with higher incomes, while the risks tend to be more severe for those with lower incomes.

“Given this unequal balance of benefit and risk, we advise caution in regard to promoting homeownership as a measure to combat wealth inequality,” say the researchers.

Their study focuses on the investment aspect of housing by discussing some benefits and risks surrounding homeownership, comparing the performance of housing to other assets such as stocks and bonds, and assessing the efficacy of homeownership incentives for reducing wealth inequality. They note that homeownership for low-income homeowners carries three types of risk that are higher for them than for high income homeowners: location, timing, and liquidity.

Read more: Evaluating Homeownership as the Solution to Wealth Inequality

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