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