Home-ownership as a social norm and positional good: subjective well-being evidence from panel data

Abstract

Much attention has been devoted to examining the absolute benefits of home-ownership (e.g. security and autonomy). This paper by contrast is concerned with conceptualising and testing the relative benefits of homeownership; those benefits that depend on an individual’s status in society. Home-ownership has previously been analysed as a social norm, implying that the relative benefits (costs) associated with being an owner (renter) are positively related to relevant others’ home-ownership values. The theoretical contribution of this paper is to additionally conceptualise home-ownership as a positional good, implying that the status of both home-owners and renters is negatively related to relevant others’ home-ownership consumption. The empirical contribution of this paper is to quantitatively test for these relative benefits in terms of subjective well-being. We run fixed effects regressions on three waves of the British Household Panel Study. We find that i) a strengthening of relevant others’ home-ownership values is associated with increases (decreases) in the subjective well-being of home-owners (renters), and ii) an increase in relevant others’ home-ownership consumption decreases the life satisfaction of owners but has no effect for renters. Overall our findings suggest that i) the relative benefit of home-ownership are both statistically significant and of a meaningful magnitude, and ii) homeownership is likely to be both a social norm and a positional good. Without explicitly recognising these relative benefits, policymakers risk overestimating the contribution of home-ownership to societal well-being