Homeownership leads to unemployment claim economists

A new study by two economists concludes that rising levels of homeownership “are a precursor to eventual sharp rises in unemployment.” As more homes are owned, in other words, fewer people have jobs.

Homeownership

Homeownership

The study, by David G. Blanchflower of Dartmouth College in the US and Andrew J. Oswald of the University of Warwick in England, does not argue that homeowners are more likely to lose jobs than are renters. But it does argue that areas with high and rising levels of homeownership are more likely to be inhospitable to innovation and job creation and to have less labor mobility and longer commutes to work.

Visit here to read the full report.

Across many countries, Governments continue to incentivized homeownership through various tax breaks and other incentives. For example, in the US, the mortgage interest deduction is one of the largest tax subsidies in that country. The UK Government has also introduced a number of measures to make the purchase of a first home easier.

However, following dramatic economic contractions, Governments have also reversed favourable tax policies, such as the decision by the Irish Government to end mortgage interest relief at the end of 2012. Finland changed its housing laws in the 1990s in ways that discouraged homeownership, putting the changes into effect at different times in different regions. Read the Finnish results here.

As evidence that housing markets may be on the rebound, arguments that Governments can no longer afford to fund property markets through generous tax breaks are likely to grow…and receive a willing ear from cash-strapped Governments everywhere, especially if they are also perceived to result in a reduction in unemployment.

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