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Ownership, Rental Costs and the Prospects of Building Home Equity

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May 2008, Hye Jin Rho, Danilo Pelletiere and Dean Baker

This report compares the ownership and rental costs in 100 major U.S. metropolitan areas. Extending the work from a previous  CEPR/NLIHC paper, "The Cost of Maintaining Ownership in the Current Crisis: Comparisons in 20 Cities," this study, while demonstrating the wide diversity in housing markets across the nation, finds that in many areas, homeownership costs are in line with rental costs.  In these areas, it is practical and desirable to focus on policies that keep homeowners in their homes. The report goes on to show that in bubble- inflated markets, however, homeownership is not only a costly and risky proposition, but continuing price declines mean that homeowners will not accrue any equity. The authors suggest that policy makers should be sure to consider affordable rental options as part of the solution when drafting proposals to help households in these markets.

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