Home Equity and Wealth Building

Session Submission Type: Panel

Abstract

Home equity accounts for the vast majority of most American households’ wealth. However, the ability to purchase a home, build equity, and eventually access that equity is unevenly distributed across socioeconomic and demographic groups. This panel includes four empirical works assessing how homeowners from different life stages and backgrounds gain access to home equity in the United States. Furthermore, multiple studies on this panel move beyond exploring access to equity, but also consider whether drawing on home equity through different channels produces positive consumer outcomes. 

First, Amorim and colleagues analyze Home Equity Investments (HEIs), a relatively new and unregulated financial product catering to consumers who may not be eligible for other, more established methods of accessing home equity. Using homeowners in Washington State as a case study, the study combines individual-level loan data drawn from tax records with interview data. Findings suggest HEIs are more common in disadvantaged neighborhoods, and that HEI consumers fall into two groups – those who are financially fluent and leverage the products to their advantage, and those without other options who may fall prey to unfavorable HEI terms.
 
Moulton and colleagues focus on Home Equity Lines of Credit (HELOC), and explores whether older adults who are potential HELOC borrowers would benefit from the access to additional equity, or suffer from the increased financial strain of loan repayment. Using records from over 100,000 HELOC applicants in Ohio between 2018 and 2022, the study specific a series of econometric models to conclude that older adults who exceeded the debt-to-income eligibility threshold set by lenders would have benefitted from access to a HELOC. 

Meehan explores whether tenants’ ability to purchase homes originally financed as affordable rentals via the Low-Income Housing Tax Credit (LIHTC) can lead to home equity building. This study leverages data from over 405,000 Detroit properties between 2011 and 2024 to estimate appreciation in the markets surrounding LIHTC-funded homes. Findings indicate that purchasing these homes would have led to wealth building opportunities for former tenants. The study also provides an analysis of the programmatic and regulatory barriers that might have hindered this process.

Finally, Haupert analyzes mortgage refinance application data to determine whether different types of mortgage lenders – specifically traditional brick-and-mortar lenders and online fintech lenders – display racial and ethnic disparities in their refinance lending patterns. The study econometrically analyzes over 11 million U.S. refinance loan application records between 2018-2020, finding that fintech lenders offer favorable outcomes, relative to traditional lenders, to Black and Latino applicants compared to similarly qualified White applicants. This effect is strongest for cash-out refinance loan applicants. 

Collectively, these studies show that access to home equity is not equally distributed to households who could benefit from it. They also offer insights into the potential barriers that might make accessing and benefiting from home equity challenging. Results draw policymakers’ attention to areas where home equity access can be expanded, but also point to key challenges that may arise along different paths to accessing that equity.

Policy Area

• Housing, Community Development, and Urban Policy

Secondary Policy Area

• Social Equity and Race

Chair

• Alec P. Rhodes, Purdue University

Discussants

• Linna Zhu, Urban Institute

• Rocio Sanchez-Moyano, Federal Reserve Bank of San Francisco

Individual Presentations

• Home Equity Investments in Washington State: Predation or Opportunity? - Non-Presenting Co-Author: Mariana F Amorim, Washington State University; Non-Presenting Co-Author: Gregg Colburn, University of Washington; Non-Presenting Co-Author: Crystal C Hall, University of Washington; Presenting Author: Julia Karon, University of Washington; Non-Presenting Co-Author: Sharon N Kioko, University of Washington; Non-Presenting Co-Author: Xinyue Wu, Washington State University

• Expanding Access to Home Equity for Older Adults through Underwriting - Presenting Author: Stephanie Moulton, The Ohio State University; Non-Presenting Co-Author: Meta Brown, The Ohio State University; Non-Presenting Co-Author: Donald R. Haurin, The Ohio State University; Non-Presenting Co-Author: Caezilia Loibl, The Ohio State University; Non-Presenting Co-Author: Rohan Angadi, The Ohio State University; Non-Presenting Co-Author: Zakary Adam Campbell, The Ohio State University

• Wealth-building potential of LIHTC tenant ownership: Evidence from Detroit - Presenting Author: Patrick Meehan, University of Michigan

• Racial Disparities in Mortgage Refinancing: Can Technology Repair the Link Between Homeownership and Wealth? - Presenting Author: Tyler Haupert, New York University Shanghai

Organizer

• Tyler Haupert, New York University Shanghai