LONDON (Reuters) - High levels of home ownership are strongly linked to subsequent rises in unemployment because labor mobility becomes reduced, according to new research.
Using data going back to 1950 across all U.S. states except Alaska and Hawaii, Warwick University economics professor Andrew Oswald finds that the lag from ownership levels to unemployment rates can take up to five years to show up.
But he said the linkage, established using data on millions of randomly sampled Americans, was extraordinarily robust.
Doubling home ownership in a state can lead to more than a doubling of the jobless rate.
"I have become convinced that by boosting home ownership we have ruined our labor market," Oswald said.
He conducted his research with David Blanchflower, a professor of economics at Dartmouth College, New Hampshire, who used to be a member of the Bank of England's Monetary Policy Committee.
Oswald said the research may go some way to explaining why Spain, with a home ownership rate of 80 percent, has unemployment above 25 percent, whereas Switzerland, with a 30 percent ownership rate, has a jobless rate of just 3 percent.
Germany, another nation of renters rather than home owners, also has relatively low unemployment.
Studies carried out independently by a Finnish researcher produced similar findings for the Nordic nation, Oswald said.
Home ownership unwittingly impairs the labor market by deterring people from moving in search of work, a process that is time-consuming and expensive; long commuting times might also discourage a householder from taking a particular job, his research suggests.
Another theory is that home owners are opposed to new businesses opening up in their neighborhoods - a phenomenon known in Britain as NIMBY, or Not In My Back Yard.
"This suggests that, without politicians being aware of it, high home ownership may slowly erode a country's industrial base," Oswald wrote in a paper for Warwick University and Chatham House, a London think tank.
He said his statistical correlations should be deeply worrying for politicians in those countries that have promoted home ownership through tax breaks and subsidized mortgages.
Britain is due to expand one such home-loan scheme, called Help to Buy, at the start of next year.
"In Britain we have incredibly cheap mortgages and we're giving help-to-buy inducements on top of that in a world where house prices are already rising far above the rate of inflation that the Bank of England says it wants. It's unbelievably illogical," Oswald told Reuters.
(Reporting By Alan Wheatley; Editing by Giles Elgood)
(c) Copyright Thomson Reuters 2013. Check for restrictions at: http://about.reuters.com/fulllegal.asp
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The whole incentive of working is to be able to afford to live a decent life. We don't dream of filling the pockets of the CEO....we dream of filling our own.
I think robust EMPLOYMENT leads to home ownership, and lack of job opportunities leads to foreclosures - obviously! That's already been proven in the US, so take your Oligarchy idealism someplace else.
Or are you stating that only the Plutocrats should own properties, and us little people should be willing to rent for our entire lives, pay whatever rent rates you decide, and move wherever you decide the work location should be???
Eff the New World Order royalty...the serfs are going to revolt. Watch out!
This has to be one of the most ridiculous articles ever posted to MSN Money. Buying and maintaining a home for your family, is still in my opinion, the American dream. Now, I do believe, with the economic meltdown of the great recession, and the subsequent drop of property valuations, which has put a substantial number of people "under water" in their home valuations....that can be a cause of "some" immobility on the part of some property owners and a deterrent of relocating for a new job...but to make a blanket statement that property ownership is the reason why the labor market is ruined is totally ludicrous.
Around here, it's dark at 10 PM, therefore, clocks cause loss of daylight.
All these years I thought unemployment was due to lack of sufficient jobs, and better yet, that the level of home ownership was dependent upon the number of people living in that geographic area who had good paying jobs and could therefore afford to own a home.........duh, what a ridiculous idea.
Stats can be so misleading, consider the situation in Switzerland, lots of mountains and not a lot of level land for building homes. Do you suppose the level of home ownership could be a result of the high cost of homes, and the low level of unemployment due to having an abundance of available jobs for a not very large population? Low unemployment could be indicative of a lot of low paying jobs, which in turn makes home ownership more difficult.
The study forgets to say the reason companies move to other locations away from houses except the fact of not in my back yard.
Most manufacturing or processing plants need cheap land and cheap labor to operate. You are not going to find those conditions in areas with a lot of houses that the owners can take care of.
Home owners can not be cheap labor as they have a mortgage to pay for. Pretty much things are just not very well thought out
Makes sense to me that this effect would show up in the data.
For all those posting inane comments about causation, I urge you to re-read the story, or better yet, go read the studies themselves. You may want to also review remedial statistics, math, or high school English. Nowhere is it mentioned that high rates of home ownership cause high unemployment. Rather, an association is strongly correlated. Again makes sense that decreasing mobility would aggravate an already bad unemployment situation.
Nothing wrong with lending standards tightening harder than Obama's anus did when the Tea Party came to D.C. Time to get back to local community and family. Keep selling out for "a job" instead of sweating it out on the farm, you will continue to suffer.
I could see the point. I moved after job without even looking whether it is good or bad locations. Company paid for relocation - that made the moving easier. My friend would not like to leave Toronto when company went out of bisiness and moved from engineering job with PhD to re-training into a lab technician for medical lab. But he owns a home there and rent out half of it making for the money lost in profesional field. Wash to wash.
Are we going to let the Federal Reserve charade continue on without transparency? The hope part is done. TIME FOR CHANGE.
While most Swiss people rent, on average they still reside where they grew up, hence they are not moving to where the jobs are. Most often they would commute to their jobs, which is very easy to do there. Maybe the focus should be on transportation and reducing people's dependence on the government for handouts?
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