It Takes Two to Borrow: The Effects of the Equal Credit Opportunity Act on Homeownership and Mortgage Debt of Married Couples

Until the 1970s, it was a common practice for U.S. mortgage lenders to discount the wife’s income in a couple’s joint mortgage application. This changed with the Equal Credit Opportunity Act (ECOA) of 1974, which prohibited credit discrimination related to marital status and sex. Despite its far-reaching consequences for lending practices, the ECOA’s effects on female access to credit have remained a matter of debate. I revisit the question based on data from the  Panel Study of Income Dynamics, and find positive effects of the ECOA on housing debt-to-income ratios and homeownership rates of married households with working wives. The difference-in-difference results at the national level are supported by event study regressions exploiting variation in hand-collected state laws. In a second step, I built a model of married households’ homeownership and mortgage choices over the life cycle to explore the effects of relaxing debt-to-income constraints via the amount of female labor income that can be counted toward a mortgage. Households react by borrowing more and preponing homeownership. This allows them to consume more at younger ages and distribute consumption more smoothly over the life cycle.