Author: Matt Waldman

Published

Eriksen home ownership study
The U.S. government spends $30 billion annually to encourage homeownership, but real estate professor Michael Eriksen’s study challenges the widely accepted notion that homeownership creates good citizens.

Biology and real estate economics are strange bedfellows, but for Terry professor Michael Eriksen, it was his initial foray into the sciences that changed his career aspirations from medicine to real estate.

Eriksen was a sophomore biology major on a pre-med track at Gonzaga University in Spokane, Wash., when the dean asked him to help develop a math and science tutoring/mentorship program called the Gonzaga Indian Education Outreach Project. As coordinator, Eriksen matched 80 undergraduates with 7th–12th graders at Native American reservation schools in Washington state, and his work with them sparked an overriding curiosity about the dynamics of low-income populations.

“Students are always talking about poverty in the Third World, but here I was in Spokane — and you can take a 30-minute drive and be in an incredibly different place,” says Eriksen, a native of Redmond, who was startled by the stark contrast between life on the reservation compared to a college town. The experience convinced him to choose economics as a second major. “I got to interact with people from this environment on a daily basis,” he recalls, “and I grew curious about what made this population unique.”

Eriksen’s fascination with low-income housing is now a central focus of his academic research. His working paper, “What are the Social Benefits of Homeownership for the Poor? Evidence from a Field Experiment” — co-written with Gary Engelhardt, William Gale, and Gregory Mills, and invited for resubmission at the Journal of Urban Economics — challenges the theory that homeownership creates good neighbors.

“A lot of the academic literature notes a strong correlation between homeownership and volunteering in the community, voting, and general engagement in other socially beneficial activities,” says Eriksen, who surveyed 1,100 low-income households in Tulsa, Okla. The U.S. government spends $30 billion annually to encourage homeownership, and much of it over the past 20 years has targeted low-income populations because of the widely accepted homeownership-community correlation.

“However, the study finds little to no evidence that low-income homeowners were more likely to volunteer, vote in a recent election, or attend a school or PTA meeting,” says Eriksen.

In fact, some of his data suggests that low-income homeowners are actually less likely to participate in such activities.

“It was naïve to think that if we provide incentives for these people to own a home, they will vote more,” says Eriksen, who notes that families involved in programs like the Low-Income Housing Tax Credit are the working poor. Although they do well when the market grows, it’s a fragile balance because they can’t afford that variance in earnings.

“No one talks about the flipside, which is what happens when the furnace breaks,” says Eriksen. “It’s not even about the housing market. It’s about the little things where they don’t have that surplus $5000 to fix things. These people won’t be volunteering to be a Little League coach because to get a house they have to take two jobs.”

Eriksen, who is beginning his second year on the real estate faculty, believes affordable housing development can be a mutually beneficial venture for investors and low-income populations.

“It’s a really unique opportunity from a business school perspective, because affordable housing is a growing field with jobs available. And there aren’t many schools that have graduates who can speak intelligently about (affordable housing) and where the opportunities are...and I feel like it can happen here,” says Eriksen, who is incorporating the subject matter into his real estate finance courses. “These students will be in positions of power in the near future, and I get to help arm the next generation of people who will put these policies into action. That’s why I really like being here.”