Friends and Neighbors: Homeownership and Social Capital among Low- to Moderate-Income Families

ABSTRACT:

This research explores whether homeownership leads to increased individual social capital among low- to moderate-income families. Social capital refers to social resources a person can access through contacts with others in his or her social networks. We theorize that homeownership can motivate interactions with others in one’s neighborhood and therefore build social capital. Using a sample of low- and moderate-income homeowners and a matched sample of renters, we collect data on overall social resources and neighborhood-specific social resources. We find that homeowners have more total social capital resources and more neighborhood social capital resources than renters. Neighborhood group involvement has an indirect effect on social capital, but explains only a small amount of the influence of homeownership. These findings hold when controlling for household-level and neighborhood-level sociodemographic variables, as well as when using statistical models that account for endogeneity. Based on this evidence, we conclude that homeownership gives people access to social capital via increased social ties to others. We discuss the implications of this finding for housing policy and suggest new directions for research on social capital.

Notes

1 When eligible renters could not be found within the census block, the radius was expanded up to four miles.

2 We ran OLS regression models to verify that there is no significant relationship between social capital and area housing cost in the CAP data set.

3 Available in STATA through the sgmediation module.

4 Of the original CAP borrowers who remain in their CAP homes, 43% have refinanced out of the CAP program. Of those who refinanced, 87% received a fixed-rate mortgage with a mean APR reduction of 1.7%.