Presented by William Diamond, University of Wisconsin–Madison
What drives disparities in housing wealth? This webinar explored new research that quantifies racial differences in the total rate of return on owner-occupied housing.
The total return to buying a house combines price appreciation with the rental value of housing services, minus taxes and costs. This presentation will introduce a new estimator of rental value that improves on existing methods by accurately predicting rents across both low- and high-value homes.
The study shows that minority homeowners earn a 1.5–2% higher rental yield than white homeowners, which largely explains their 2–2.5% higher total return. At the same time, the returns of Black and Hispanic homeowners are more volatile and more sensitive to the business cycle. Much of this disparity can be traced back to observable differences in income, and the results are consistent with a model in which minorities face more severe credit constraints. These conditions bid up rents, depress house prices, and make prices more sensitive to credit supply.
Presenter bio
William is an Associate Professor of Finance at the University of Wisconsin–Madison. Their research explores how financial institutions create safe, money-like assets through risky investments, and how this process can expose the financial system to crises. The work investigates both the role of financial regulation in preventing such crises and the effectiveness of fiscal and monetary stimulus in mitigating the recessions that follow.
Chair: John Morrow, Queen Mary University of London
Discussant: Kevin Fox, University of New South Wales and ESCoE