Understanding the causes of wealth disparities and their policy implications is essential.”
Professor Luchtenberg’s research often explores how people make financial decisions, such as borrowing money and dealing with mortgage defaults. For instance, Luchtenberg is currently researching the decisions people make when they default on their mortgage, which informs efforts to educate others on their options. Understanding what drives these decisions enables policymakers to recognize patterns and design programs that assist borrowers in making choices that best help them reach their goals.
Over the past few years, Luchtenberg’s research has expanded to directly tackle topics of equity and inclusion in this sphere of business. Though race is often used as a control variable in behavioral finance, she saw opportunities to explore how it interacts with financial access and regional trends. “My coauthors and I have a working paper examining municipalities’ borrowing costs,” she explained. “In it, we find that counties with a higher proportion of Black residents pay higher borrowing costs.” Noting a connection between an area’s racial makeup and its ability to obtain the financial support it needs, Luchtenberg aimed to highlight other places where these disparities exist in hopes of closing gaps wherever they are found.
This goal motivated Luchtenberg’s recent research, “Does Homeownership Reduce Wealth Disparities for Low-Income and Minority Households?” published in the Review of Corporate Finance Studies last summer. Luchtenberg and her coauthors worked directly with the United States Department of Housing and Urban Development (HUD) to gather data on households participating in the department’s Housing Choice voucher program. The program assists eligible households in making mortgage payments and covering other homeownership expenses, enabling them to purchase a home rather than continuing to rent. The team hoped to determine whether homeownership contributed to a low-income household’s ability to accumulate wealth compared to renting while also recognizing where wealth gaps remain regardless of homeowner status. “The research process for this paper was very different from my other projects,” Luchtenberg recalled. “Instead of collecting data before analyzing and writing an article, we submitted a registered report based on data we hoped to receive from HUD.”
Luchtenberg and her team worked with HUD for nearly a year to gather and analyze data on the voucher program. By comparing a household’s wealth accumulation after a home purchase to accumulation while the same household was renting property, they determined that people generally can gather more wealth as homeowners. However, the racial wealth gap persists regardless of homeownership. Though minority households experience wealth gains after becoming homeowners, these gains are significantly lower than those of white households participating in the same program. When considered along with existing research on racial disparities in homeownership, Luchtenberg’s study reveals that while programs such as the HUD’s voucher program enable financial growth, they also need to consider that the program’s recipients don’t always start out on equal footing.
I hope the reader takes away an increased understanding that just because a program is put in place, it doesn’t necessarily confer the same benefits to all.”
“We found that homeownership is beneficial for building wealth in low-income households, but the wealth gain is so much less for minority households. It’s important to understand why these disparities exist, so policymakers have the information to create more effective legislation,” Luchtenberg said.
Professor Luchtenberg has plenty of questions to continue exploring the benefits of homeownership, especially in low-income households. Besides wealth accumulation, she is also curious about whether owning a home influences housing stability as a whole and how racial disparities appear in that regard. “Many people assume that homeownership is a terminal state,” she said. “That’s not always the case.” Determining the effectiveness of homeownership programs involves determining how they help people buy homes and how they help people keep their homes.
Luchtenberg also plans to continue her research into issues of equity and inclusion in the financial world. This academic year, she received the first faculty fellowship from AU’s Antiracist Research and Policy Center, which enabled her to continue her work with university support. She and another research team are currently studying alternatives to assessing the mortgage default risk in immigrants. Banks often determine default risk through an individual’s credit score; this places immigrants without a US credit history at a disadvantage. Luchtenberg believes there’s a better way to ensure they have the same opportunities to borrow.
As a Kogod professor, Luchtenberg incorporates her research and her professional experience in the classroom. She teaches courses in real estate and strives to ensure that her students emerge with an understanding of topics in housing, mortgages, and investment. Beyond that, she uses her experience to support her student's needs as they pursue their degrees. “As a navy veteran myself, I’m aware of some of the specific hardships our veteran students face,” she said. “I think my research and experience enable me to understand and relate to my students.” In both her research and her teaching, Professor Luchtenberg works to create environments that keep everybody in mind.