Does home ownership hurt the job market?

MPR Photo/Nikki Tundel

Minnesota has one of the highest  home ownership rates and lowest jobless rates in the nation. That’s been consistently true in good economic times and bad.

So it’s completely weird  lately to read research arguing that, nationally, just the opposite is true —  that rising home ownership in a state is a “precursor to eventual sharp rises in unemployment in that state” and “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.”

You’d be forgiven for a “Wait, What?” moment.

The report, by researchers at Dartmouth College and the University of Warwick in England, argues that rising home ownership leads to workers being less mobile and commuting more.

It also suggests fewer new businesses are created in states with high home-ownership and concludes that these connections have gone unnoticed because the time lags are long.

“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,” Stephen J. Dubner with the Freakonomics blog writes today.

I don’t know. Maybe we’re an oasis here in Minnesota.  The argument that home ownership rates damage the labor market runs totally against what we’ve seen here. Here’s a look at the state’s annual unemployment rate (blue) and its annual home ownership rate (red) since 1984 on  a relative index.

joblesshousing

I don’t see a connection.

Nationally, smarter minds than mine say it’s there and that our household and local economies would be better off if we weren’t so tied to our homes and felt more able to move around.

Urban researcher Richard Florida says the data are in line with what he’s seen, that “metros with home ownership rates in excess of 70 percent tend to have relatively low levels of innovation, wages, incomes, and economic activity… The higher level of rental housing in these metros contributes to their flexibility and economic dynamism.”

But Joel Kotkin, a researcher who’s faced off before with Florida on socioeconomic issues, spends many words today ripping holes into the report and Florida’s take.

Maybe Kotkin’s best point: “Pundits and economists often fail to recognize that people are more than simply profit-maximization machines ready to cross the country for an income increase of a few thousand dollars; they also seek out friends, stable neighbors, familial comfort, community and privacy.”

  • Jack

    Really? Who funded this study?
    So the fact that we have high home ownership in Minnesota but yet have innovative companies such as 3M and the various medtech giants seems to fly in the face of this study.
    Home ownership does not cause unemployment but unemployment can cause homelessness.

  • jon

    I’d like to offer a counter opinion, especially since your article lists Florida as the counter to MN. Perhaps, innovation is lower, and unemployment higher when there is a higher level of home ownership because of the period in peoples lives when they become homeowners?

    I’m just saying, older people (talking “settle down and raise a family” age through “elderly kids are moved” out types), tend to not be hired as quickly by companies (especially in this mess of a job market) they tend to have kids, or other reasons tying them to their location, they tend not to be the innovators so much as the managers in the workplace. They also tend to be much pickier about what jobs they will take, and for what pay.

    I think they found a correlation and assumed a causality when really they found and indicator of a situation, not the cause.