How Do Mortgage Subsidies Affect Home Ownership? Evidence from the Mid-Century GI Bills

Abstract

The largest twentieth-century increase in US home ownership occurred between 1940 and 1960, associated largely with declining age at first ownership. I shed light on the contribution of coincident government mortgage market interventions by examining home loan benefits granted under the World War II and Korean War GI Bills. Veterans' benefits increased home ownership rates primarily by shifting purchase earlier in life, explaining 7.4 percent of the overall 1940–1960 increase, and 25 percent of the increase for affected cohorts. A rough extrapolation suggests that broader changes in mortgage terms can explain 40 percent of the 1940–1960 increase. (JEL G21, N22, N92, R21, R31)