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The analysis begins by distinguishing between the length of stay in a particular dwelling and the duration of stay in one or more owned homes. All existing published studies focus on the length of stay in a dwelling (either owner or rented), or on the time to mortgage default. These studies focus on the time spent in a particular dwelling unit, not the length of time in a particular “state of the world” such as owning or renting. While these studies are of interest for some questions, they do not provide the needed information to determine whether different lengths of continuous spells of owning or renting contribute to racial gaps in homeownership rates.

A simple example confirms that the lengths of time spent as a renter and owner affect the overall ownership rate. Assume that African Americans and whites have the same residence history over a 40 year period, consisting of four spells: first the individual rents, then owns, then rents, then owns. If African Americans spend 9 years in each rental spell and 11 years in each ownership spell, then their average homeownership rate will be 0.45. If whites spend 6 years in each rental spell and 14 in each ownership spell, then their average homeownership rate will be 0.70. In this case, the sole cause of the 25 percentage point gap in ownership rates is the difference in the durations of spells of owning and renting.

The study of duration of renting and owning should lead to important policy implications. Policies that promote only temporary spells of homeownership have little impact on the national homeownership rate. What is important is promoting new ownership spells that are sustainable. Policies that lengthen existing ownership spells also will raise the national ownership rate, even if the rate of attaining first-time or subsequent spells of ownership is not affected.