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There's no place like home: the relationship of nonstandard employment and home ownership over the 1990s
American Journal of Economics and Sociology, The, Oct, 2004 by Barbara A. Wiens-Tuers
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Introduction
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AFTER A BRIEF RECESSION IN THE EARLY 1990s, the United States experienced a period of economic growth that, until recently, seemed unlimited. One of the apparent manifestations of prosperity in the economy has been the increase in home ownership over the last decade. According to a study using Current Population Survey (CPS) data, home ownership among U.S. families increased from 60.6% in 1989 to 62.6% in 1998. Both absolute and relative home ownership rates rose for black and Hispanic families over the same period, although in 1998 the home ownership rate for white families remained 50% higher than that for minorities. Home ownership rates were higher in 1998 than 1989 for families in each quintile of income distribution, although the amount of increase differs across groups (Bostic and Surette 2000). On the other hand (as any good economist would say), it is easy to obscure the bigger picture by focusing on such a narrow span of time. In the 30 years prior to the 1970s, home ownership rates increased by over 20 percentage points (Segal and Sullivan 1998). The increase in home ownership over the last few years followed two decades of stagnant or falling rates of home ownership. According to data from the American Housing Survey (AHS), the proportion of households owning the home in which they reside was 67.4% in 1975, dropped to 65.1% in 1985, and recovered to 66.1% by 1997 (Orr and Peach 1999).
The high inflation and interest rate instability of the 1970s exacerbated institutionalized constraints to home ownership for many households, and rates of home ownership fell during the period. But the 1970s also witnessed attempts to break down the racial barriers to economic opportunity and home ownership. The civil rights movement drew attention to problems of discrimination and redlining in mortgage lending. In response to pressure from civil rights advocates, Congress passed the Home Mortgage Disclosure Act (HMDA) in 1975, and the Community Reinvestment Act (CRA) in 1977. Recent revisions to CRA, the role of CRA ratings in bank merger decisions, and more enforcement created incentives for banking institutions to develop special lending programs and marketing to CRA target groups (Avery et al. 2000). In addition, technological changes driving the development of secondary mortgage markets and innovations in mortgage lending coupled with a booming economy with little inflation and low interest rates are credited with a significant role in the rising home ownership rates over the 1990s.
Even though the gap in home ownership between white and nonwhite households remains, the good news is that, overall, home ownership seems to be more accessible to demographic groups previously excluded from the housing market. But there is a dimension to the discussions of home ownership that seems to be missing from the literature: the effect of changing job structures on home ownership. Prior to the current expansion, rigid labor markets and implicit job security deriving in part from nonmarket institutions broke down as market forces drove the move to a more flexible labor market (Abraham and Houseman 1993; Kinnear 1999; Golden and Applebaum 1992; Gordon 1996). Businesses increasingly used nonstandard and part-time workers to gain flexibility at lower cost. A key result for some workers during this period of structural change was decreased job tenure and employment uncertainty (Gordon 1996), which carry not only short-term consequences (Belman and Golden 2000; Polivka, Cohany, and Hippie 2000; Wiens-Tuers 1998) but long-term consequences as well (Ferber and Waldfogel 1998). Has employment and income uncertainty associated with some types of nonstandard employment, especially temporary work, impacted home ownership for households even during a general expansion of the economy and generally more accessible credit?
In order to understand why this question is important, the first thing to consider is what home ownership represents. For many households, a home is the most valuable asset they will ever own. Table 1 presents some figures from the 1998 Survey of Consumer Finances for 1992, 1995, and 1998. The general trend shows an increase in the value of both financial and nonfinancial assets for all families, but decomposing the figures into homeowners and renters shows a striking difference. The median value of nonfinancial assets, which includes the value of the primary residence, is at least 15 times higher for homeowners than for renters for each of the three years. In 1998, homeowners held 12 times more in financial assets than did renters. For homeowners, the primary residence contributed to over 50% of the value of all assets held by the household. Equity in a home represents increased borrowing power as well as a cushion against transitory shocks to income.
Second, there are positive spillovers in the form of increased social capital for communities when residents are homeowners. Putnam (1998) defines social capital as the norms and networks of civil society that facilitate cooperative action, and states that neighborhood ties represent the "place-based" end of the social capital spectrum. There is no standardized way to measure social capital but, in general, the focus is civic engagement, which includes the degree to which residents vote and participate in voluntary, groups, clubs, and sports leagues (Lang and Hornburg 1998; Putnam 1998). The connection to others in the neighborhood and the element of trust (which in part is developed by participation in neighborhood organizations) is part of what DiPasquale and Glaeser (1999) and Temkin and Rohe (1998) use in developing measures of social capital. DiPasquale and Glaeser (1999) and others find that home ownership and the associated tenure in the community influences investment in social capital. Discourse on social capital has increased in the wake of the general consensus that the nation's social health is in decline and is exacerbating social problems in many urban neighborhoods (Temkin and Robe 1998). However, DiPasquale and Glaeser (1999) also note that home ownership imposes costs in the form of decreased mobility. This is an important aspect to home ownership that cannot be ignored in an era of decreasing employment tenure and "job hopping."
