Briefing Paper

David G. Blanchflower and Andrew J. Oswald
The Danger of High Home Ownership

'The evidence is that high home ownership weakens the vitality of the labour market and slowly grinds out greater rates of joblessness'

  • Encouraging home ownership has been a major policy objective for Western governments in recent decades. However, evidence from the United States strongly suggests that high home ownership is a major reason for the high unemployment rates of the industrialized nations in the post-war era.
  • Rises in a US state's home-ownership rate are associated with subsequent increases in that state's joblessness. The effects are strikingly large. In the long run, doubling home ownership in a state can lead to more than a doubling of the unemployment rate.
  • Three channels – lower mobility, longer home-to-work commute times and lower rates of business formation – can all be expected to contribute to higher unemployment.
  • European data provide evidence that is consistent with these findings.
  • Governments should encourage more renting, as the Swiss and Germans do, and they should not give financial incentives for ownership.
  • Given that for decades Western governments have intervened in housing markets to encourage home ownership, and now grapple with stubbornly high unemployment, these findings should arouse serious concern.
Project: Shifting Competitive Advantage in the Global Economy 

Event: The Danger of High Home Ownership: Greater Unemployment, 23 October 2013.