That is the surprising question asked (and answered) by David Blanchflower and Andrew Oswald in a new working paper. If this effect is real, and if the mechanisms by which it occurs are true, then this paper is hugely important for policymakers, civic planners, and the rest of us:
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. The elasticity exceeds unity: a doubling of the rate of home-ownership in a U.S. state is followed in the long-run by more than a doubling of the later unemployment rate. What mechanism might explain this? We show that rises in home-ownership lead to three problems: (i) lower levels of labor mobility, (ii) greater commuting times, and (iii) fewer new businesses. Our argument is not that owners themselves are disproportionately unemployed. The evidence suggests, instead, that the housing market can produce negative ‘externalities’ upon the labor market. The time lags are long. That gradualness may explain why these important patterns are so little-known.
Our latest Freakonomics Radio podcast is called “The House of Dreams.” (You can download/subscribe at iTunes, get the RSS feed, or listen via the media player in the post. You can also read the transcript below; it includes credits for the music you’ll hear in the episode.)
In this episode, Stephen Dubner returns to his childhood home in Quaker Street, N.Y. It’s a drafty farmhouse on thirty-six acres where his parents, a pair of Brooklyn-born Jews who converted to Catholicism , raised eight devout children. The house, Dubner says, felt like the eleventh member of the family. Which is why his family took it so hard after his mother finally sold the house and the very bad thing happened to it. A while back, Dubner wrote a New York Times essay about this terrible turn of events. But now, as the podcast explains, there’s been a new development — a “boomerang story,” if you will. Read More »
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The most fundamental fact about rental housing in the United States is that rental units are overwhelmingly in multifamily structures. This fact surely reflects the agency problems associated with renting single-family dwellings, and it should influence all discussions of rental housing policy. Policies that encourage homeowning are implicitly encouraging people to move away from higher density living; policies that discourage renting are implicitly discouraging multifamily buildings.
We’ve had the good fortune over the last few years here at the blog to bring you occasional nuggets from University of Arizona economist Price Fishback, whose research on the Great Depression often offers powerful insights about our current economic situation.
Price’s latest contribution to the blog, this time joint with Ken Snowden from UNC-Greensboro, discusses the Home Owner’s Loan Corporation, which bought and refinanced 1 million severely delinquent loans between 1933 and 1936. Did things works out well or poorly? You’ll have to read on to find out. And if you like what they’ve written, keep an eye out for their soon to be released book (with Jonathan Rose as a third author).
Learning from the Last Great Mortgage Mess
By Price Fishback and Ken Snowden
For the past four years, the U.S. has faced a housing crisis that shows no signs of ending. The situation was similar in June 1933 when the Home Owners’ Loan Corporation was created to address the nation’s last severe mortgage crisis. Some have suggested that a new HOLC could help resolve the current crisis, but their characterizations of the HOLC have been incomplete. Our goal here is to summarize recent research that provides a fuller picture of the HOLC and its impact on housing markets in the 1930s. Read More »
If I stood in the center of Times Square and said something like “Moses didn’t really part the Red Sea,” or “Jesus never existed,” people would probably keep walking around me, ignoring what I said.
But if I stood there and said, “Going to college is the worst sin you can force your kids to commit,” or “You should never vote again,” or “Never own a home,” people would probably stop, and maybe I‘d lynched. But I would’ve at least gotten their attention. How? By knocking down a few of the basic tenets of what I call the American Religion.
It’s a fickle and false religion, used to replace the ideologies we (a country of immigrants) escaped. Random high priests lurk all over the Internet, ready to pounce. Below are the Ten Commandments of the American Religion, as I see them. If you think there are more, list them in the comments.
Our recent podcast on “conspicuous conservation” looked at the “Prius Effect” — that is, how valuable it is for green-leaning consumers to signal their devotion to the environment by driving an obviously-hybrid Toyota Prius. (BTW, you can also fake it with an “instant hybrid conversion kit.”) The episode was based on an interesting paper by Alison and Steve Sexton called “Conspicuous Conservation: The Prius Effect and Willingness to Pay for Environmental Bona Fides.” It included some talk about solar panels as well, and how some people mount them on the street-facing side of their homes even though the sun shines more strongly on the rear. Read More »