A new study, Does High Home-Ownership Impair the Labor Market? by David Blanchflower and Andrew Oswald, reveals an association between high levels of home-ownership and high levels of subsequent unemployment, indicating a gradual adverse impact imposed by high home-ownership rates on the local labor market.
According to the report, the lags from ownership levels to unemployment levels can take up to five years to show up. The authors suggest that areas with high home-ownership rates tend to also be characterized by lower labor mobility, longer commute times, and lower rates of business formation.
The authors use a sample of two million individuals across the contiguous U.S. states to measure the number of weeks worked, labor mobility, commuting, and business patterns. The data is from the Current Population Survey dating between 1985 and 2011.
The authors found higher unemployment rates in the states that had a higher home-ownership level historically, with this pattern going back to the 1980s. Unemployment did not significantly correlate with current home-ownership levels, but the “lagged” home-ownership rate over time served as a positive predictor of later unemployment levels, even after controlling for personal characteristics such as education levels.
According to the research findings, a doubling of home-ownership rates across a state can be associated with more than a doubling of the unemployment rate. The findings also suggest that long commute-to-work times may contribute to rising unemployment by increasing costs for both employers and employees. Finally, higher home-ownership rate may deter business formation, possibly because of zoning restrictions or NIMBY (Not In My Back Yard) effects.
The authors claim that this study provides a statistical observation of the linkage between home-ownership and the labor market, and it can be a point of departure for future research. However, the study is limited as it does not fully measure all external and causal factors that may be driving unemployment and housing market shifts.
The report can be found on Professor Andrew Oswald’s webpage at: http://bit.ly/1dXeBG9