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Title: Housing finance and the mid-century transformation in US home ownership: the VA home loan program
Citation Type: Working Paper
Publication Year: 2010
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Abstract: The sharpest increase in U.S. home ownership over the last century occurred between 1940 and1960, driven largely by a decrease in the age at first ownership. To shed light on the contributionof several coincident large-scale government interventions in housing finance, I examine veterans' home loan benefits provided under the postwar GI Bills. I apply a regression discontinuitydesign to two breaks in the probability of military service by date of birth, for cohorts comingof age at the end of World War II and the Korean War, to estimate the impact of veteran statuson home ownership. I find significant, positive effects of veteran status on home ownershipin 1960. Consistent with a model in which the impact of easier loan terms declines with age,these effects are larger for younger veterans, and diminish in 1970 and 1980 as the cohorts age.Complementary analyses suggest veterans' non-housing benefits and military service itself areunlikely to explain the observed differences in home ownership. I find suggestive evidence thatallowing earlier home purchase led to earlier family formation, and that veterans' housing benefits encouraged suburbanization. My baseline estimates imply that veterans' housing benefitscan explain approximately 10 percent of the increase in aggregate home ownership from 1940to 1960.
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Authors: Fetter, Daniel K.
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Institution: Harvard University
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Publisher Location: Cambridge, MA
Data Collections: IPUMS USA
Topics: Aging and Retirement, Housing and Segregation
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