The edges of home ownership are usually examined in terms of entry (affordability), sustainability (risk of exit through financial stress), and utility (retirees trading-out for asset-based welfare). However, this research shows there is considerable 'churn' at the edges of home ownership in all age groups.
The edges of home ownership contain important signals about the functioning of the housing system, the link between housing and the wider economy, and the relevance of owner occupation to the financial and wider wellbeing of home occupiers. These edges are usually thought of, if at all, in terms of barriers to entry for first-time buyers (with a spotlight on affordability), the challenge of sustainability (how to minimise the risk of premature exit through financial stress), and, more recently, the question of utility (the extent to which retirees trade-out of ownership to mobilise their principle asset-base for welfare). There has, however, been rather little interest in the two-way permeability of the interface between renting and owning across the life course, in the way the edges of ownership function financially and in the delivery of housing services, or in the policy implications of this transitional zone. ‘The edges of home ownership’ project addresses these gaps.
The project has three aims:
1. To describe the circumstances and identify the characteristics of the neglected group of households that churn in and out of ownership.
2. To identify the characteristics and events that drive household decisions at the edges of ownership.
3. To document the contribution of the edges of ownership to the resilience of Australian housing markets.
The project uses the household panel surveys of Australia (HILDA) and the UK (BHPS and UKHLS) to analyse the character and trajectories of households on the edges of ownership. Specifically the analysis comprises:
1. Descriptive and exploratory techniques to display the data, raising questions about the differences between those who attain and sustain ownership, those who achieve then leave that tenure, and those who churn back and forth between owning and renting across the study period.
2. Modelling exercises to identify the socio-economic and demographic factors disposing households to stay, leave or churn, and to consider any role that housing equity withdrawal might play.
3. The construction of composite biographies to illustrate some typical pathways through the edges of ownership.
The analysis profiles three groups of owners: ongoing owners who are able to attain and sustain home ownership to the end of a ten-year study period; leavers, who attain owner occupation but exit during the study period; and churners, who leave and return to owner occupation at least once. Some of the more important results are:
1. Ongoing owners provide a benchmark for sustainability.
2. There is more mobility than expected in all directions across the edges of ownership.
3. These transitions occur across the life course.
4. There is considerable ‘churn’ from owning to renting and back again.
5. These patterns are more conspicuous in Australia than the UK, and may reflect important housing system differences.
High rates of exit from home ownership and increasing indebtedness across the life course threaten an Australian retirement incomes policy based on low housing costs in old age.
Evidence of churning at the edges of home ownership questions the targeting of direct subsidies on first home buyers, and draws attention to the limitations of tax arrangements that concentrate housing tax subsidies on the higher income over-65 outright homeowner.
The greater than anticipated mobility at the edges of ownership signal a niche market for a range of financial instruments to manage owner occupation in the 21st century.
Authored by Gavin Wood, Susan J. Smith, Rachel Ong and Melek Cigdem.