From Fields to Mortgages: The Cultural Origins of Homeownership

Were your ancestors tilling the plains of a European “breadbasket” area such as Ukraine, or did they herd cows near the Horn of Africa? The answer may (partly) determine whether you currently own the roof over your head or not, according to Guillaume Vuillemey, associate professor of finance at HEC Paris. Basing himself on a vast empirical study, he argues that cultural representations around land and cattle – respectively immovable and movable traditional agricultural assets – are passed on through generations and still today, help explain how likely individuals are to purchase a home or not. In particular, people originating from societies with a history of crop agriculture are more likely to own real estate.

1/ Home ownership: a financial choice with deep roots

“Shall we buy a house/apartment/farmhouse or just rent?” is the single most important financial decision most households face, deciding to make the roof over their heads (or gold, or stocks) their main asset. 

Beyond purely economic considerations (affording a 20-year mortgage), homeownership is also shaped by how household members think of safety, value and social status. And these cultural preferences are deeply rooted: they are inherited from past agricultural societies, in which wealth came mainly in two forms, one movable (cattle), the other immovable (land). But fields and herds were way more than economic assets. They permeated culture through folklore and mythology, leaving motifs that still influence representations, and ultimately homeownership rates today.  

2/ The cultural heritage of farming systems  

To justify my hypothesis, I first examine ethnographic material. Drawing from a global folklore database, I find that crop-based societies feature more land-related motifs in their myths, while cattle-based societies feature more cattle-related ones. Among the former are most European countries, going back as far as Ancient Greece, throughout the Middle Ages. There, for centuries, land was associated with power and prestige.  

Think of the clever cat in the Puss in Boots tale who portrays the miller's son as a landowner to help him towards a happy end. Conversely, in traditional East African pastoral societies like the Nuer people, power structures and representations are based on cattle. Today, Western countries, and many pastoral societies, have become industrial, and even post-industrial economies, leaving behind most of their traditional institutions surrounding land and cattle. Yet the cultural backgrounds persist, still affecting they way societies perceive movable and immovable assets.  

3/ Homeownership is higher in regions with a crop-agriculture past

Looking at present-day figures for the OECD region (offering homogenous data across 41 countries), I find data consistent with my hypothesis: countries with a strong history of land-based agriculture also display higher homeownership rates today. The effect is significant: a one-standard-deviation increase in the relative importance of my variable (relative importance of cropland versus pasture) is associated with roughly a 6-point rise in home ownership.  

The saem pattern appears within Europe at the regional level. Even after holding country effects constant, regions with a crop-agriculture past show higher ownership rates. These results alone do not prove causality, though. They could be due to alternative explanations.  

4/ Cultural representations about land are carried along with immigration

So I set out to disentangle the influence of culture from that of local experience (after all, war destructions, inflation and a host of other factors could very well affect the desire to purchase real estate).  

To this end, I study second-generation immigrants in the United States. The rationale is that these individuals – here, a sample of more than 5,000 – live under the same national institutions and economic system, but inherited different cultural backgrounds from their parents’ countries of origin (145 different ones).  

The results hold: I find that descendants of parents from historically crop-based societies are more likely to own a home. This remains even after controlling for other factors such as income, education, race, geography, marital status, and household structure.  

5/ Narrowing down the cultural legacy of agriculture

Finally, I test for alternative explanations. I show that the result does not disappear once I control for factors such as GDP, inequality, democracy, rule of law, or broader cultural indicators. The evidence suggests that my finding is not simply a generic “homeownership culture.” What predicts ownership among second-generation immigrants is the part of homeownership in the country of origin that can be traced back to soil conditions and agricultural history, not the residual part unrelated to agriculture. I thus strengthen the argument for a specific cultural legacy of agriculture.

Methodology

The author studied various types of data: he constructed an indicator, “CropShare” to measure the relative importance of pasture and cropland across 41 OECD countries over the past two centuries, and compare with home ownership figures – additionally checking his CropShare against data about subsoil carbon, which could influence crop-growing. Using data from a compilation of folkloric motifs from 958 societies across the world, he observed whether they were related to the type of local agriculture. To isolate the effect of culture among second-generation immigrants, he used a so-called epidemiological approach, focusing on in-country variations (thus “fixing” institutions).