Jonas Wogh

In many countries, homeownership is seen as the desirable tenure form both from an individual and from a societal perspective. This dissertation examines various aspects that influence households’ ability to become homeowners beyond their own financial resources.

Chapter 2 studies the effectiveness of policies that support young homebuyers financially. Relying on the Dutch transfer tax exemption for homebuyers under 35, we assess the impact of such policies on various individual- and market-level outcomes. Most importantly, we find that the exemption led to a significant increase in home purchases by eligible buyers, which did not, however, translate into a lasting ownership effect. This is because additional transactions generated by the policy mostly reflected repeat purchases by existing owners, as well as timing responses by individuals who were already planning their first purchase. In addition, most of the incidence of the subsidy fell on sellers, rather than buyers, since between 60% and 90% of the tax exemption was captured by increased prices for eligible units. We combine all of these empirical findings in a simple welfare analysis, calculating the utility consequences of the policy for every member of the Dutch adult population. While the tax exemption mostly benefited those in the upper-middle part of the income distribution, those with low incomes lost out, as access to homeownership continued to be out of reach for them even with a tax incentive.

Chapter 3 studies the influence of parental cash transfers on young first-time homebuyers. Concretely, it investigates how homebuyers who receive parental support use the funds in their immediate housing decisions, as well as in their longer-run consumption and savings decisions. I find that during the home purchase, (close to) every euro of parental transfer is used to deleverage, by increasing the size of the initial down payment. This mechanically lowers the monthly costs that homebuyers face due to mortgage interest payments. However, rather than investing these savings elsewhere, transfer recipients use their higher residual income for consumption. The results therefore suggest that targeted parental wealth transfers are not only used to accumulate long-run wealth, but also to help the recipients smooth consumption in the middle of the life cycle.

Chapter 4 studies the broader housing market implications of parental cash transfers. During a period of special tax incentives for cash transfers, we compare the bidding behavior of all homebuyers who do and do not receive parental support to fund their purchase. At the individual level, we find that transfer recipients make between 0.5% and 2% higher bids for homes of the same quality, compared to other buyers. Further analysis indicates that overbidding by transfer recipients occurs in those local markets where competition is tighter. At the market level, overbidding has a spillover effect: in postcode areas where many homebuyers receive a parental transfer, we find that other buyers start to make higher bids as well, driving up average prices.

Chapter 5 studies the role of ethnicity, which has been shown to constrain access to homeownership for prospective buyers belonging to ethnic minorities. Using information on the origin country of all homebuyers and homesellers in the Dutch residential housing market, we study the interaction between buyer and seller ethnicity. We find that, even within small sub-markets, transactions between buyers and sellers of the same migrant group occur more frequently than predicted by random matching. This indicates preferences for ethnic matching in housing transactions. Crucially, ethnic matching preferences have an effect on sale prices. Relative to transactions involving other buyer-seller combinations, those involving same-ethnicity buyers and sellers sell at a discount of around 4%. This discount is not explained by differences in house and neighborhood quality. Excluding transactions that likely did not occur at arm’s length—such as those between family members and those involving buyers and sellers living in the same neighborhood—reduces the estimated discount to 2%. Various additional sub-sample analyses provide evidence that the discount is driven by ethnic in-group preferences, which induce sellers to forgo a financial return when negotiating with same-ethnicity buyers.