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Citation Information

Type Working Paper
Title Housing finance and the mid-century transformation in US home ownership: The VA home loan program
Publication (Day/Month/Year) 2010
URL https://www.researchgate.net/profile/Rohini_Pande/publication/228672634_Housing_finance_and_the_mid-​century_transformation_in_US_home_ownership_the_VA_home_loan_program/links/02e7e52e68d299aa4e000000.​pdf
The sharpest increase in U.S. home ownership over the last century occurred between 1940 and
1960, driven largely by a decrease in the age at first ownership. To shed light on the contribution
of several coincident large-scale government interventions in housing finance, I examine veterans’
home loan benefits provided under the postwar GI Bills. I apply a regression discontinuity
design to two breaks in the probability of military service by date of birth, for cohorts coming
of age at the end of World War II and the Korean War, to estimate the impact of veteran status
on home ownership. I find significant, positive effects of veteran status on home ownership
in 1960. Consistent with a model in which the impact of easier loan terms declines with age,
these effects are larger for younger veterans, and diminish in 1970 and 1980 as the cohorts age.
Complementary analyses suggest veterans’ non-housing benefits and military service itself are
unlikely to explain the observed differences in home ownership. I find suggestive evidence that
allowing earlier home purchase led to earlier family formation, and that veterans’ housing benefits
encouraged suburbanization. My baseline estimates imply that veterans’ housing benefits
can explain approximately 10 percent of the increase in aggregate home ownership from 1940
to 1960.

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