The access of immigrants to the homeownership market

Laurent Gobillon, Matthieu Solignac

21 January 2016

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The capacity of European countries to assimilate immigrants has been much debated recently due to large inflows of migrants and refugees. Assimilation of immigrants can be measured across many dimensions, and a particular emphasis has been put on evaluating their success on the labour market (Borjas 2014). Another meaningful marker of assimilation is the access of immigrants to the homeownership market. Indeed, homeownership is considered as a sign of economic success and a profitable investment. Moreover, owned dwellings are often located in neighbourhoods providing green amenities, good quality schools, safety and peer effects with educated families (Dietz and Haurin 2003). The gap in homeownership rate between natives and immigrants is often large – around 20 percentage points in the US – and it does not disappear over time (Borjas 2002).

Whether this long-lasting gap reflects specific difficulties for immigrants to access homeownership is an important policy concern, as such difficulties could justify a policy intervention. However, this gap could also result from differences in behaviour, with immigrants choosing different strategies on the housing market that do not involve homeownership. This is particularly true if they do not want to stay in their host country and plan to emigrate.

Why a lower homeownership rate for immigrants?

Several factors have been put forward to explain the gap in homeownership rates between natives and immigrants, the most obvious one being the lower level of endowments of many immigrant groups. The inability to speak the language of the host country is a significant barrier (Painter and Yu 2010). Moreover, some immigrants are less likely to benefit from family transfers to secure the down payment when taking a loan. Lower education can prevent immigrants to get highly paid jobs and accumulate wealth to purchase a home. Even if they own a foreign diploma, their credentials might not be recognised in the host country and they may suffer from discrimination on the labour market (Altonji and Blank 1999, Bertrand and Mullainathan 2004).

Immigrants can also have a lower access to the housing and credit markets. They lack information on these markets and they may suffer from discrimination affecting not only the screening of housing units (Yinger 1986) but also the type of mortgage and insurance made available to them (Ross and Tootell 2004). Even if some immigrants access homeownership, they may be more vulnerable to adverse economic shocks that could make them default on their mortgage and force them to resell their dwelling (Bayer et al. 2015).

Immigrants’ location choice also influences their access to homeownership, since both the proportion of owned dwellings and housing prices vary across cities. Ethnic neighbourhoods could favour homeownership as they can help avoid discrimination. They can also support an ethnic secondary housing market, and they can provide specific amenities and information on the housing market (Flippen 2010, Finnigan 2015). Time spent in the host country can be beneficial, since it allows the acquisition of a local diploma, the learning of the host language and the gathering of information on the labour, housing, and credit markets. It also facilitates wealth accumulation and marriage with natives who can contribute to down payment.

Finally, staying in the rental sector can be a choice for some immigrants who prefer to make financial transfers to their family in their home country or accumulate wealth to purchase a dwelling in their home country after return migration.

Explaining differences in the evolution of homeownership rates

How disparities in homeownership rates between natives and immigrants evolve over decades has been mostly studied using repeated cross-section approaches with an emphasis on cohort methods (Myers and Lee 1998, Sinning 2010). However, for immigrants, the evolution of the homeownership rate not only reflects changes in access to homeownership, but also selection effects with exits and entries into the host country of individuals with specific resources and preferences. Therefore, the access to homeownership of immigrants can only be investigated using data that follow individuals over time.

In a new paper (Gobillon and Solignac 2015), we study the dynamics of homeownership for immigrants in France using a large longitudinal dataset that follows individuals over time from 1975 to 1999. We assess the impact of entries and exits on the homeownership rate of immigrants, and we analyse the evolution of the difference in homeownership rates between natives and immigrants for cohorts of individuals over that period. In particular, we quantify the role of individual, family, and location characteristics, and their effects on this evolution.

As shown by Figure 1, the homeownership rates of natives and immigrants have increased over the period. The difference in homeownership rates between the two groups is large at around 15 points in 1975 and it has only slightly decreased by 1.4 points over the period. Figure 1 also shows that there is some heterogeneity across immigrant groups. Indeed, there is long-lasting large gap in homeownership rates between natives and north African immigrants, at around 35 points. By contrast, the gap between natives and southern European immigrants, while rather large in 1975, has vanished over time. These stylised facts mask important composition effects. In particular, there are ingoing and outgoing flows that modify the immigrant population on the territory and affect the homeownership rates. Figure 2 shows that immigrant entrants and leavers have much lower homeownership rates than stayers. Interestingly, when focusing on the individuals staying in France over the entire 1975-1999 period, trends in homeownership rates are different from those observed for the overall population as can be seen from Figure 3. The gap in homeownership rates between native and immigrant stayers is smaller, but it increases by 3 points over the period. The gap between native and north African stayers grows larger and southern European stayers never catch up with native stayers. 

Figure 1. Homeownership rates of natives and immigrants

Figure 2. Homeownership rates of immigrant stayers, entrants and leavers

Figure 3. Homeownership rates of native and immigrant stayers

Entrants into the territory have a large negative effect on the evolution of immigrant homeownership rates. Although they have on average a better education than immigrants living in metropolitan France from 1975 to 1999, they are also younger and at an earlier stage in the wealth accumulation process. Moreover, they locate themselves in larger cities where the homeownership rate is lower. Additionally, the effects of their characteristics are lower than those of stayers. For instance, the effect of age on the propensity to be homeowner is lower. A possible explanation is that time is needed to enjoy the benefits from settling in France. By contrast, immigrants leaving France have a positive effect on the evolution of immigrant homeownership rates because they leave while having low access to homeownership. This can result from a residential strategy that involves remaining a renter before returning to the home country or moving to an alternative country. Nevertheless, the effect of leavers on the evolution of immigrant homeownership rates is only one third that of entrants.

Interestingly, the effects of characteristics on homeownership for native and immigrant stayers have evolved in favour of immigrants, which is consistent with steps towards assimilation. There are important differences between immigrant groups, since the effects of characteristics on homeownership have evolved in a more favourable way for southern Europeans, suggesting assimilation, but have changed in a detrimental way for north Africans. Moreover, among renters accessing homeownership during the period, north Africans end up living in newly owned dwellings that have fewer rooms per person than those of natives and that are located in municipalities where the unemployment rate is much higher.

Conclusion

Our work shows that the evolution of homeownership rates of immigrants is a complex process because the immigrant population is constituted of various waves of immigrants, with some succeeding well and purchasing a home while others are unable to access homeownership. There are also important selection effects with exits and entries of immigrants into the territory. This occurs because immigrant entrants and leavers have different propensities to be a homeowner than immigrant stayers.

We find that in France, northern African immigrants lag behind not only natives but also southern European immigrants, for whom the results point at significant steps towards assimilation. These disparities can be explained by differences in individual characteristics across groups, and by differences in the effects of these characteristics on accessing homeownership. A possible reason is the existence of discrimination against northern African immigrants not only on the labour market, but also on the credit and housing markets. Additional studies are needed to assess on which markets discriminations are significant as they can justify targeted anti-discrimination policies.

References

Altonji, J and R Blank (1999), “Race and gender in the labor market”, In Orley Ashenfelter and David Card (eds.) Handbook of Labor Economics,Volume 3, Part C, book chapter: Washington, DC: Urban Institute Press, 3143–3259.

Bayer, P, F Ferreira, and S Ross (2015), “The Vulnerability of Minority Homeowners in the Housing Boom and Bust”, American Economic Journal: Economic Policy, Forthcoming.

Bertrand, M and S Mullainathan (2004), “Are Emily and Greg More Employable Than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination”, The American Economic Review, 94(4):991–1013.

Borjas, G (2002), “Homeownership in the immigrant population”, Journal of Urban Economics, 52:448–476.

Borjas, G (2014), Immigration Economics, Harvard University Press, 296 p.

Dietz, R and D Haurin (2003), “The social and private micro-level consequences of homeownership”, Journal of Urban Economics, 54(3):401–450.

Finnigan, R (2015), “Racial Segregation, Minority Population Chance, and Minority Homeownership, 1980-2010”, Working Paper, University of California at Davis.

Flippen, C (2010), “The spatial dynamics of stratification: Metropolitan context, population redistribution, and black and Hispanic homeownership”, Demography, 47(4):845–868.

Gobillon, L and M Solignac (2015), “The homeownership of immigrants in France: selection effects related to international migration flows”, CEPR Working Paper 10975.

Myers, D and S Lee (1998), “Immigration Trajectories into Homeownership: A Temporal Analysis of Residential Assimilation”, International Migration Review, 32(3):593–625.

Painter, G and Z Yu (2010), “Immigrants and Housing Markets in Mid-Size Metropolitan Areas”, International Migration Review, 44(2):442–476.

Ross, S and G Tootell (2004), “Redlining, the community reinvestment act, and private mortgage insurance, Journal of Urban Economics”, Journal of Urban Economics, 55(1):278–297.

Sinning, M (2010), “Homeownership and Economic Performance of Immigrants in Germany”, Urban Studies, 47(2):387–409.

Yinger, J (1986), “Measuring Racial Discrimination with Fair Housing Audits: Caught in the Act”, The American Economic Review, 56(5):881–893.

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Topics:  Migration

Tags:  homeownership, immigrants, France, Discrimination, assimilation

Laurent Gobillon

CNRS Senior Researcher, Paris School of Economics; Research Fellow, IZA and CEPR

Postdoctoral fellow at the Population Studies Center, University of Pennsylvania

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