Losey, Clare (2021-08). Much Ado About Affordability: Examining the Intersection between Purchase Affordability and Neighborhood Opportunity. Doctoral Dissertation.
Thesis
Homeownership comprises the largest source of household wealth--and debt--in the U.S. The ability of the vast majority of households to attain homeownership stems primarily from the myriad programs and policies promulgated by the federal government to facilitate purchase affordability--the primary prerogative of federal housing policy. Federally-backed mortgages--FHA-insured, VA-guaranteed, and RHS-guaranteed loans--play a prominent role in achieving such an aim. Federally-backed mortgages significantly ease the affordability of homeownership, particularly for low-income and minority households, by loosening the borrowing constraints--the LTV ratio, DTI ratio, and credit score--required to qualify for a mortgage loan. Housing planners, policymakers, and practitioners frequently utilize indicators of housing affordability. However, these indicators generally frame affordability as an independent concept, ignoring its indelible relationship with neighborhood opportunity, despite considerable attention devoted by federal housing policy to each topic. The positive correlation between purchase affordability and neighborhood opportunity indicates that federally-backed mortgages, while enhancing affordability, may still largely constrain low-income households to low-opportunity neighborhoods--in essence, sacrificing opportunity for affordability. In Chapter 6, I develop an improved indicator of purchase affordability, the first of its kind to allow the user both to specify the costs of mortgage financing and differentiate affordability across the four primary types of loans--conventional, FHA-insured, VA-guaranteed, and RHS-guaranteed mortgages. In Chapter 7, I use confirmatory factor analysis to model the relationship between purchase affordability and neighborhood opportunity and examine the effects of federally-backed mortgages on this relationship. In Chapter 8, I introduce a new framework which maps the disparities in the interaction between purchase affordability and neighborhood opportunity by loan type. Findings indicate that purchase affordability varies considerably across the income distribution and loan types, broadly indicating that existing indicators of purchase affordability fail to sufficiently encapsulate the issue. Purchase affordability proves more favorable for the lowest-income cohorts in Anderson County; in McLennan County and the Austin-Round Rock MSA, the highest-income cohorts. Furthermore, findings suggest that the interaction between purchase affordability and neighborhood opportunity differs within and across the study sites, with less variability evident in Anderson County and greater variability apparent in the Austin-Round Rock MSA.
