We explore the hypothesis that high home-ownership damages the labor market. Our results are relevant to, and may be worrying for, a range of policy-makers and researchers. We find that rises in the home-ownership rate in a U.S. state are a precursor to eventual sharp rises in unemployment in that state.
This makes intuitive sense to me. In general, home ownership means a big debt and a disincentive to take jobs away from the home even if they’re better than the one you have. Or even if you don’t have a job at all, at least until things get so bad that you have to declare bankruptcy.
Another thing to put on the pile of “subsidizing home ownership is really stupid economically” arguments, so it can be ignored by politicians like all the rest. (Here’s afewothers)We voters have trained them to avoid sacred cows like this one like the plague, even when changing it would help the job market.
Does the article adequately address cause and effect? On the individual level, you’re hypothezising that home-ownership causes sessile behavior. But, homeownership is often a symptom of settling down, specifically, to have children. A family with children may: 1) have one adult transition to staying at home or work part time and 2) be much less willing to move for their children. In other words, the new homeowner is entering a very different stage in their lives that matters more profoundly than a piece of property.
Having skimmed the article, the linkage seems tenuous, at best, and complicated by numerous factors, including a very long lag time. Frankly, I don’t see how it links to individual behavior.
Home ownership also spikes when the economy is doing well. What happens after the economy does well? It crashes, and unemployment goes up.
While I agree with them that a strong home ownership trend does likely have externalities (including lessened mobility of the workforce), I think they have a long way to go before they prove causality in this particular case.
Wow, another paper/article author that decides “I have data, lets just make something up that it proves.”.
He link to charts that specifically use Spain and Switzerland as examples. Switzerland has low home ownership but high employment. Spain has ownership numbers like the US, and sky high unemployment. Spain has major economic issues right now, as well as unemployment but also a serious real estate bubble and high corruption. Most of its unemployed are non-home owning youth, and the largest factors for that are the labor laws and economic structure not the real estate bubble.
Switzerland is more interesting. It does tax owner-occupied houses steeply, mainly since housing is expensive with room for new houses limited based on geographic and political structures. It also has excellent renter protection laws, often rent control, and rent not mortgage is a deductible expense on your taxes. This is why Switzerland has its ownership rates. It has nothing to do with employment. Ask anyone in a rent controlled apartment in say NYC and strong rent controls make keeping the same apartment very attractive. So, in this case, rental does not increase worker mobility, which is their premise using Switzerland as their example. Laws keep rent both reasonably priced, afford consumer protection and with the tax deduction this makes renting in Switzerland not at all comparable to renting in the US where it is usually the opposite. If you think the high cost of real estate, creating the bubble causes a crash, then Switzerland is still a poor data point for comparison as it has very high real estate costs.
While I agree that subsidizing mortgages in the US with our tax structure may have contributed to the housing bubble, undoing a tax advantage that the middle class takes on in a 30 year window, and which is abused by multi-home owning wealthy that will protect their tax breaks via lobbying for loopholes would be very difficult. The only way to do it without totally economically reaming the middle (and if you have a mortgage and only one house you are here) or lower income renter is to both phase it out slowly, and introduce mandatory renter protections, rent controls and have rent be the deductible on your taxes instead of mortgage like Switzerland. I do not have enough popcorn for the responses if it was suggested in the US to eliminate the mortgage deduction, raise property taxes steeply, and introduce rent as a tax deductible. The way our current congress is functioning, I imagine the multi-home owners would keep their deductions on vacation homes, and the rest of real estate prices would crash without the mortgage subsidy, and with no rental protections or deductible the homeless population would skyrocket. Homeless are also not a very mobile work force for other reasons.