Explaining the Spatial Variation in Homeownership Rates: Results for German Regions

This paper employs cross-sectional data on 96 German regions to investigate the interregional variability of homeownership rates. Among the explanatory variables, the analysis includes important regional housing market indicators as well as regional socio-demographic composition, urbanization and labor market performance. An estimation strategy is chosen which accounts for different forms of spatial dependence among the regional units. We find that regional differences in the relative price of owning versus renting, and the affordability of owner-occupied housing play a key role in explaining why homeownership rates vary so substantially across the country. The results indicate significant neighborhood effects for several variables.