Is a high home ownership rate a sign of a successful country?

I saw an El Pais spread on this, which I cannot find on-line.  Here are the European countries with the highest owner occupancy rates:

1. Romania, 97.5%

2. Lithuania, 93.1%

3. Croatia, 90.1%

4. Slovakia, 90.0%

How about the lowest rates?

1. Switzerland, 44.3%

2. Germany, 53.2%

3. Austria, 57.4%

Get the picture?


it would be nice to hear some theories on why more home ownership would be bad.
statistics show that if you own a home you are 20% less likely to be an entrepreneur.

Labor mobility seems to be the most obvious.

Labor mobility is a large part of the reason; but it's also partly to do with the incentives that homeownership creates and the restrictions that it imposes on the wider community.

For example, if a city wants to build a new road or new transit line through an existing area, or even if they just want to re-zone from residential to commercial, it's much easier and much cheaper to get tenants to move than homeowners. There's an excellent demonstration of this in the opening scene of Disney's movie "Up".

Having a large rental population increases not only labor mobility but also encourages strong competition between cities. If one city improves over another, tenants can move to enjoy the benefits more quickly than owner-occupiers. When tax revenue is collected locally (as it is in Germany and Switzerland), the city that attracts the most residents will also gain the most revenue. Thus every city has a financial incentive to improve itself, instead of merely a political incentive. The results speak for themselves: Swiss, German, and Austrian cities regularly top Mercer's Quality of Living Survey. Even an average city in Germany is much nicer than an average city in the UK.

At the individual level, homeowners are fiercely opposed to any new housing development, lest it devalue their existing homes. Collectively they exert huge political pressure (since homeowners are usually in the majority) and can stifle economic growth.

Having said all that, I do still think that labor mobility is the key factor.

What's the investment comparison between an ownership home versus a rental of the same size and amenities in the US? My gut feeling always was that the rental options were overpriced (as seems the conventional wisdom in the US) but the comparison is hard to make.

Local taxes, maintainance, taxation benefits, fluctuating mortgage rates, changing housing value, variable returns on alternative investments etc. all make the analysis complex.

I never got a good answer to that question. I suspect a lot of sub-optimal decisions get made in the renting-versus-owning scenario simply because good analysis and information is impossible for the man on the street.

I'm buying an apartment style townhouse in two weeks. My mortgage, HOA, and taxes will be about the same as rent on a comparable apartment, but I will have to pay heat and the maintenance. I expect it will cost $2-3k more per year in the short term. However, my mortgage will be paid off in 15 years or less. If I upgrade the townhouse with better appliances and flooring I could rent it for 50% more than my expenses.

Rent has to cost more, doesn't it? Because owners are bearing the risk of loss. Both of literal loss, as in a hurricane hits, and more indirect loss, as in the neighborhood goes to seed or the nearby plant closes and it's time to move. Easy to do for the renter, but the owner is stuck.

According to this week's Crain's Chicago Business, renting in Chicagoland is 40 percent more expensive than owning. Anecdotally, when I moved here 5 years ago my rent in a Class A high-rise on the 26th floor was $1.88/ft2, and today the average is approaching $3/ft2. My neighbors across the hall are moving and their combined condo 3br/3ba is going to command $4 to 5 per square foot. Rents in the downtown districts are insane, and with condo purchase prices at rock-bottom right now, owning is winning even with assessments, taxes and HOA fees.

Crain's article:

Poorer countries have more self-employment & small businesses. "Across the 21 countries examined in the C.E.P.R. study, self-employment rates correlate -0.67 with the World Bank’s measure of gross national income per capita, a correlation that is significant at less than the 1 percent level"
In "Poor Economics" Duflo & Banerjee point out that poor slum-dwellers would rather have predictable 9-5 jobs, but those are too scarce.

If large companies are already exploiting what they can, then there is little need for startups. Startups arise because of inefficiencies in the way companies do business.

The corresponding USA statistic is 68%. Bad, yet not so bad?

From the list above, does the high ownership have something to do with a communist legacy?

Yes, it often does, because many reforming communist countries simply sold their public housing en masse to the occupiers. It will be interesting to see if some of these are converted to rentals over time, as renting is often a more efficient tenure for apartments for reasons of externalities, negotiation costs etc (see Linneman's theory of 'landlord production efficiency').

A few more home ownership statistics...From

Singapore 87%
Norway 77%
Australia 69.5%
Canada 67%
Finland 66%

it does appear that some relatively poor countries (Greece, Mexico) have high home ownership rates and some rich countries have low home ownership rates. However, other rich countries have high home ownership rates.

The owner-occupancy rates are highest in the former East Block countries which, with western advice and under neo-liberal governments in the early '90s, rapidly privatized the state-owned housing stock. This was often achieved by selling at under-market prices with very low interest rates and has led to subsequent distortions of the market, inter-generational conflict (for example, in Hungary, the children of those who purchased in the early '90s found themselves, in the 'oughts, only able to find private housing loans in Euro or SF and are now swallowing the currency risk) and, perhaps most dangerously, large numbers of homeowners find themselves responsible for the upkeep of objects, many very old, that they are unable to afford (in Budapest, the message is: if you see terra cotta ornaments on a building in the center of the city, walk on the opposite side of the road as those things are bound to fall off!)

It's interesting to notice (in hindsight!) that almost all the economic disaster states of the EU zone had very high home ownership rates. Could this be a good marker of an impending crash?

The numbers seem made up. I recently saw another similar table but with Bulgaria at the top with an aprox 80% rate, which is more believable. Also very few of the people in my generation (late 20s) in Romania own a house (yes, anecdotes but with a stated 97.5% rate…). My parents own there apartment but I have lived for 6 years only in rented apartments in Bucharest. The same was true for a lot of people I know (basically everybody who did not live with there parents). The average wage in Bucharest is around 450 euro and the average price for a one room apartment is around 40.000 euro (the price is in decline). Of course very few rents are declared (to avoid tax) so maybe in official statistics the ownership rate is higher. In all the places I’ve lived I had no contract….

Romania is one rich country with poor people ..
Swisse is country very safe ..who keeped with deposites to all the world (rich)
thank you

Here in Slovakia everyone is living in the apartments they obtained from the government or children in the same. It is not reality here
These numbers mean nothing in that situation. Prices for new apartments are.unaffordable by the general population.

Wealthier countries have more investor-landlords than poor countries. What these stats don't tell us is what percentage of people are home-owners. A country could just have a low number of domiciles but a very high owner-occupancy rate.

I, too, find it hard to believe that only two people in 100 are renting in Romania.

I don't find it difficult to consider the underlying thesis, but I wonder if confirmation bias, perhaps, isn't leading the author to an underinvestment in critical thinking.

I think it means 2 dwellings in 100 get rented out. Thats different.

But yes, I'm still skeptical.

Why is it different?

Do rented dwellings have more residents, on average, than owner-occupied ones?

Or rather, 2 dwellings in 100 are reported as rented out.

Is an apartment building a single "dwelling", or is it many dwellings?

Also, the reporting issue is huge. In China, many people rent apartments and get paid in cash. They'd not be terribly interested in reporting this fact to researchers who may be working with taxation authorities. I can't imagine that Europe would be much different.

Where is Singapore on this list?

In its usual place on lists of European nations.

Very low, given the prevalence of public housing.

Turns out that I am hilariously wrong, although more because the Singapore state has redefined a very long lease as "ownership".

Besides being something with a roof and propably walls there is not much left of romanian home-ownership-titles that you can compare with swiss ones. The top five countries listed above provide you with an ownership title that is much less worth, because the fundamentals of your home, the rule of law, is undermined by corruption.

"For example, if a city wants to build a new road or new transit line through an existing area, or even if they just want to re-zone from residential to commercial, it’s much easier and much cheaper to get tenants to move than homeowners."

This does not apply in such states like romania, because a) you'd get much easier evicted and b) the home owner would have to bargain, for which he would need to care, for which it must be worthwile, for which it would need a functioning rule-of-law.

And thus the supposed effectiveness of high tenantship rates in Germany is not comparable to that supposed lack-of-effectiveness in Romania. Just consider the public outcry in Germany around "Stuttgart 21" (a train station renewal project) and than imagine a nuclear waste facility about to be built next to your transilvanian summerhome.

This sort of list reminds me of the staggering statistics from countries like Greece years ago: Greeks seemed to be by far the most entreprenurial folks in the EU, since they had by far the highest rate of self-employment.

So, since Greeks been and are relatively poor compared to the other europeans, is self-employment a bad choice? Indeed it is not. But the self-employment stats won't tell you the important information - that most Greeks didn't have that choice. The same goes for the majority of Home-Owners of Romania. Don't mix up cause and effect.

As some commenters note, the direction of causility here is clearly not from home ownership to (relative) poverty. It seems that *both* had a common cause in Socialism.

In case anyone is interested here are the population densities for the countries in people per square kilometre:

Romania 80, Lithuania 49, Croatia 76, Slovakia 111
Switzerland 193, Germany 230, Austria 100

Switzerland is even more crowded than the figures suggest as so much of it is steep mountain, but on the other hand one could argue this means they have more land per person because if you ironed the country flat it would be the size of Romania.

I was going to say that it looked like Tyler had found a list of how urbanized various European countries are.

Now if you control for that, what effect does the home ownership rate have? I suppose that as long as the marginal homeowner has a steady career and is sensible with their spending habits and as long as the population of such people is increasing over time, more home ownership will tend to create wealth.

I am happy to read that Lithuania has one of the lowest population densities, as I am just about to move there:

probably in economically successful countries, housing assets are much more valuable and there are a greater assortment of things you can do with your money as well, so people will choose other things over housing assets.

Most of the previous commenters have already made all the objections I was going to make.

But still, I think TC's core point (unless I'm misreading him) has to do with the idea that home ownership has a special place in American mythology, and that it is probably the mythology the drives the market more so than the pursuit of economic success. I don't think anyone here would be ready to admit that home ownership is a condition of financial success. Think of how many bajillionaires are renting coat closets in Manhattan.

An entrepreneur once told me that buying a home "is a type of forced savings for poor people." His perspective was that when people buy a house, they are forced to pay it off, and therefore build equity that they probably otherwise wouldn't build. So there's that.

Involuntary savings is a theoretically good reason, but I think the last twenty years have amply illustrated that if you force people to save involuntarily, they'll just leverage that equity and borrow more money. Even in the depths of the recession, I recall driving by a bank that had a sign that essentially said "Take out a second mortgage to buy Christmas gifts".

Would there be a case for outlawing some of these highly leveraged loans; especially when made against primary homes?

I didn't really mean it in the sense of government-enforced policy. More like psychologically forcing yourself to save.

i do get the picture--let's expand the mortgage interest tax deduction for 2nd, 3rd, 4th, and 5th homes

2nd homes are already covered in the U.S. And if you don't have a second home, you can take the deduction on a boat loan (provided the boat has living quarters).

Apparently the answer isn't obvious. Has anybody seen the analysis Barney Frank used?

What were the alternative investments and opportunities to own property during the time these countries were under communist rule?

I doubt anyone invested in the S&P.

Notice, in case you didn't, that the highest home ownership rates were among the former communist states.

Does this imply that home ownership is a negative externality and should be taxed instead of subsudized? While, as a homeowner, I enjoy the deduction for paying a mortgage, I've been wondering if this is the right policy.

Yes, it does. There is a very strong case against removing the subsidies for home ownership. They clearly distort the market in bad ways (subsidies usually do).

Alex says,
For example, if a city wants to build a new road or new transit line through an existing area, or even if they just want to re-zone from residential to commercial, it’s much easier and much cheaper to get tenants to move than homeowners.
Alex should read "Gideons Trumpet" or some other blogs about eminent domain abuse.

While there are some good points here, particularly from Andrew M, no one has raised the (to me) obvious point that a really high ownership rate indicates the lack of a functioning rental market. And to the extent the lack of a functioning rental market is due to red tape, that indicates a screwed up economy.

Incidentally, the same applies to a high rate of unemployment, its probably an indication that there is something wrong with the normal labor markets, its hard for whatever reason to hire anyone but yourself.

This is not totally unlike a survey of what nations carry the most cash in their pockets as they walk through parks.

It is illusory, because statistics of economy are like the sand dunes in the desert ... when just about any wind blows the shape shifts.

The real inquiry should involve how many people keep their property once they purchase it, and then a discussion of the reasons they thereafter lost that property, were forced to sell it, or willfully sold it.

At least for Romania, the reason for the extremely high ownership rate is related to a particular institutional component. At the beginning of 1990, one of the first measures adopted by the new government after the fall of the communist regime was to "privatize" dwellings. Lessees of state-owned apartments were given the right to buy their dwellings at very good terms (with inflation, the price of an apartment was within two-three years less than one year of family revenues).

Apart from that however, there is a cultural dimension in home ownership: in Europe, the Southern Latin countries tend to have a higher ownership rate than the Nordic ones.

I own my home.

I wouldn't have it any other way, if only because I no longer deal with crazy landlords.

If home ownership is bad for the economy, too bad. It's good for me.

Interesting. Do you have the numbers for Cities? Owner-occupancy in London, New York, Tokyo, Singapore, Mumbai, LA, Lagos, HK?

I wonder what this chart would look like if it factored in the value of liens and obligations against home owners...

Almost all of those places with high ownership rates had governments in recent history that liked building lots of housing. Also, in Eastern Europe at least, many of those home owners never purchased the homes they lived in under the previous system, they were handed over during privatization.

I am more interested to know whether, conditional on a country having already over-invested in housing, home ownership is a good idea.

This seems exceedingly useless as the highest home ownership all seem to low density former Soviet bloc nations while the lower home ownership is very mature densely populated states. If we use individual states we would find New York to have one of the lowest home ownership rates in the US. And the Midwest states would have the highest. Now draw a conclusion that does not correlate to population density. Also since the chart only looks at Europe and it would interesting how Africa nations might change the chart. Frankly, I suspect the US rates drops to ~64% but this will be followed by lower birth rates.

Just think if we showed national fertility rates in order somebody would make the conclusion that the lowest birth rates have the more functional economies. Is that the right conclustion?


Croatia has a lower fertility rate than Switzerland or Germany. Maybe homeownership is just too expensive in Germany or Switzerland and people below 40 are not willing to give up some standard of living like restaurant meals to live in theor own home.

If someone hasn't mentioned this, isn't this the consequence of privatization. Renters were allowed to buy their apartments at below market prices.

In a state with a weak or corrupt or bad legal system, possession might be even more than 9 parts of the law. Widespread home ownership -- very likely shack or shanty ownership -- might simply be the consequence of people not wanting to take the risk of renting out their property.

I waited a few hours, whether any of your catches the obvious:

The 3 examples of extraordinary low home ownership in the rich world are EXACTLY the 3 German speaking D-A-CH countries (Deutschland, Austria, Confederatio Helvetica, or however that is spelt precisely ) according to their nationality symbols on the cars)

You have a Phd ... Right? I am sure that the ownership rate of homes in whole host of developing countries are higher than germany or switzerland. Reason: rental markets are near dead because contracts are difficult to enforce and squatters are difficult to evict. So next time, put some serious analysis than your right wing talking point that the idea that everyone should own their own home is bogus... Now, do YOU GET THE PICTURE?

No. I don't get the picture. What's unique about the countries at the top of list is that they were under communism. When the communist system folded, the people were given their current places of residences as property distributed from the state.

The second fact is that idea of leverage in real-estate is considered the anglo-saxon system. In countries where the anglo-saxon system has not taken hold, renting is the only avenue open to the common man (and the housing stock is usually socialized).

Or Israel with 0% home ownership, as the state owns all the land and leases it out for 50 year leases?

Is that really any different that property taxes? How can I be said to "own" something that I have to pay the gov't $5k a year to continue to live in?

Matthew Yglesias has commented on this phenomenon previously in comparing US states. See:

"he common factor here seems to be economic stagnation leading to relatively low housing costs plus relatively small numbers of new people moving to the state. Now, it'd be dumb to say that high levels of home ownership are making Mississippi so poor (try history) or causing Michigan's current economic woes (try to auto industry) but it does seem to indicate that boosting homeownership rates doesn't produce any miraculous consequences."

"Let me just add to this that if you look at homeownership rate by state it's clear that a super-high rate of homeownership is neither a sign of economic vitality nor something that creates economic vitality."

I can see lots of butthurt in the comments over the idea that the "ownership society" doesn't lead to prosperity, but I will repeat: We must be bold and go where the data leads us.

what about the owner occupancy rates in the poor countries in Asia and Africa? Is it far higher than for the U.S and Europe?

I am surprised that anyone took this premise seriously.

Defining what is a successful country and then correlating that to a single data point such as home ownership, while simultaneously ignoring myriad other factors (history, culture, legal structures, pricing etc.) is rather silly.

I think that is the premise

some subsidize property other rents so?

Umm, playing along with the puerile premise, the picture I see is:

People who live in ex-communist countries with cheap land, have a great desire to own their own property before wealth concentration/property values reach western european levels

I think there might be one other reason. I suspect that in low ownership countries employers subsidize rental housing of its employees (sort of like health care in the US), creating a disincentive to buy among employees.

So my guess is that this says more about taxes than anything else.

This link has home ownership rates for some of the countries but I can't find any for the Balkans.

The same is true for Hungary. The reason why eastern European countries are on this list (and all top places seem to be occupied by CEE countries) is privatization.

After the fall of communism almost all home dwelling real estate was handed over to those who lived in them (as a matter of law these people were lessees beforehand and could purchase the apartments usually for nominal amounts). Since then, the population levels remained constant (or even decreased for many CEE countries), although people - with the availability of mortgage loans - started to purchase further apartments as kids left family homes (although kids tend to stay with parents until very late compared to US figures).

These developments meant that there is no physical pressure to build new real estate, however if financing is available then individuals - for reasons of convenience - do take the opportunity and purchase further apartments.

Since most of the real estate were owned by the former lessors by the early nineties, the lessee position became rare. Only those remained lessees who were so poor that they could not afford even the nominal purchase prices - or students who rented for a short period of times. Thus - for an adult person - it is uncool to be a lessee.

Once almost everybody is a homeowner (and with inheritance by middle age almost everyone becomes a home owner) and the population does nor increase there is no (perceived) demand, so investors will not build buildings for renting them out.

Prior to the 1946-7 (when the CEE communist regimes nationalized real estate), the percentage of rented apartments must have been similar to the Wester countries on the list (about 50%) -- many buildings (a bit like condos in the US) with 10-40 units were owned by one single owner and many further such houses were owned by other private investors, pensions funds etc. These, as well as houses built later (during the 1947-1990 period) then were handed over to the occupants and not to the previous owners (although some CEE countries did give back to previous owners or to their legatees, however such buildings tended to be smaller ones in terms of number of apartment units in such buildings; many CEE countries issues so called compensation coupons but did not give back property directly to the previous owners).

Once this situation christallized,it is unlikely to change significantly.

Odd point, though, is that the only place in the U.S. that makes sense to buy a home is the most expensive place, which is the SF Bay Area. The point here is the economic diversity all within commuting distance. If you home owner and reside in a company--single plant--town in the midwest or a town out west that's based on a nondiverse economy (Las Vegas--gambling and real estate), good luck.

Trust in stocks and bonds can allow people to invest more there and less in their homes.

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