American households lost trillions in home equity wealth during the recent housing crisis, causing widespread distress among communities, families and children. According to the Brookings Institution and First Focus, more than two million children have lost their homes to foreclosure since 2008; about six million more are at risk of foreclosure, residing in owner-occupied or rental properties that have fallen into serious mortgage delinquency. An estimated 1.6 million children are now homeless, living in shelters or motels, or doubled up with others - an increase of 33 percent since the start of the foreclosure crisis.
Social scientists now grapple with documenting the effects of the crisis on children facing housing instability. Some effects of the crisis are relatively easy to identify: foreclosures often force residential and school moves, displacing children from established community and peer networks. Yet efforts to understand the magnitude of these effects--as well as whom they most affect, and in which locations--often are stymied due to a lack of data and the challenges of tracking highly mobile populations. Still more difficult is the task of understanding how housing instability affects children's social, emotional, physical and cognitive well-being.
In the last few years, research teams at academic institutions, think tanks, nonprofits and government agencies have embarked on a series of studies to answer these questions. What has emerged from these studies is a set of findings as nuanced and complex as the housing crisis itself. Surprisingly, early evidence on academic outcomes suggests that some children exposed to housing instability did not fare as poorly as expected.
A recent study in New York City found that while children experiencing foreclosure are more likely to move schools, the effect is relatively modest (6.1 percentage points). In addition, children experiencing foreclosure are significantly less likely to exit the public school system than similarly situated students who do not experience foreclosure. The same study found that though children experiencing post-foreclosure school moves end up attending lower-performing schools, the change in school quality was no different from that experienced by non-foreclosed children who switched schools.
Another recent study in San Diego found that children residing in housing who received a notice of default performed worse in mathematics on the annual state assessment, and that the poor performance persisted over time. However, the magnitude of the effect--a decrease in performance of 0.03 standard deviations--is relatively low and corresponds approximately to a single-point decrease in a student's percentile ranking (say, from the 75th percentile to the 74th percentile). The researchers found no effects on student performance in English/language arts.
Further, the negative effects on mathematics performance held only for children residing in owner-occupied housing, not rental homes. Understandably, the significant psychological and financial stress accompanying foreclosure risk is likely to be greater when experienced by a student's homeowner parents than by a landlord. Students residing in foreclosed rental homes also may receive support via tenant protection laws, which allow families to remain in place for the duration of their lease agreement.
Children in the New York and San Diego studies also may have benefited from school choice and open-enrollment policies, which allow students to remain enrolled at the same school despite a forced residential move outside the attendance zone boundary. Results from studies like these provide a useful baseline for testing hypotheses about student performance across multiple locations. For example, foreclosures may be less likely to affect average student performance adversely in areas with low homeownership rates or expansive school choice policies.
Still more intriguing is the possibility that the housing crisis actually improved some students' academic performance. First, the loose underwriting standards precipitating the crisis allowed some families to purchase homes beyond their means, near higher quality schools. Second, many families who fell into negative equity as a result of declining home values could continue making their mortgage payments, but were unable to sell their home. This circumstance potentially could create a "lock-in effect" for some families by reducing the likelihood of residential or school moves that may harm students' academic performance. Third, some families caught in foreclosure may have experienced a period of free housing in which they did not pay their mortgage (or rent), enabling them to redirect financial resources in ways that benefited their children academically. Fourth, the housing crisis enabled many families to purchase newly foreclosed homes at a discount, affording them access to higher quality schools.
These dynamics do not counterbalance the tremendous hardship weathered by children in the recent foreclosure storm. Rather, they illuminate just how complex the effects of large-scale economic events can be. In the last several years, the John D. and Catherine T. MacArthur Foundation's "How Housing Matters to Families and Communities" initiative has funded several large-scale studies to examine the effects of housing instability on children. (I am currently working with researchers at New York University, University of Connecticut and Northwestern University on a MacArthur-funded grant to examine the effects of the housing crisis on student academic performance using data from New York City, the state of Florida, and San Diego). When completed, these studies will aim to inform policymakers of the critical yet nuanced links between housing and children's well-being.