Does homeownership increase happiness? Empirical evidence from Korean Labor and Income Panel Study Data

Abstract

Homeownership is widely recognized as a key determinant of individual happiness; however, previous research has shown mixed results regarding its effects. This study investigates the relationship between homeownership and happiness in Korea, with a focus on temporal dynamics and spatial variation. Utilizing panel data from the Korean Labor and Income Panel Study (KLIPS) from 2009 to 2023, we apply a panel event study model to analyze the anticipation, short-term, adaptation, and long-term effects of homeownership. The findings reveal three key insights. First, homeownership leads to a significant short-term increase in happiness, peaking immediately after acquisition but gradually declining over time due to hedonic adaptation. Second, the happiness effects vary by housing type and size: apartment (APT) ownership is associated with the highest average happiness, and transitions from non-apartments to apartments generate the most substantial gains. Notably, both upsizing and downsizing are linked to increased happiness, except in rural areas, suggesting that ownership itself plays a more critical role than size alone. Third, spatial differences are evident; homeownership enhances happiness in urban areas, including both the Seoul Metropolitan Area (SMA) and non-SMA regions, but has no statistically significant effect in rural areas. These results suggest the importance of considering spatial context and housing characteristics in designing housing policy. In particular, policy efforts should aim to support the long-term emotional well-being of homeowners by tailoring strategies to regional conditions and addressing the varied needs of different housing types and household preferences.