High Home Ownership Can Seriously Damage Your Labour Market, New Study Shows

[Eddie_George]

...But he talks sense.

Government policies that boost the amount of home ownership in a country are likely to inflict severe damage on the labour market, new research from the University of Warwick suggests.

Professor Andrew Oswald from the University of Warwick and Professor David ("Danny") Blanchflower from Dartmouth College examine a century of unemployment and home-ownership data for the states of the USA from 1900 to 2010. Combining those numbers with modern data on millions of randomly sampled Americans, the researchers show there is a powerful link between the housing market and the later health of the economy.

Rises in home-ownership in a US state are followed by substantial increases in the unemployment rate in the state, a fall in the mobility of its workers, a rise in commuting times, and a drop in the rate of new business formation. The authors are careful to check, and they replicate, their findings for different periods of US history. The release of their work coincides with a new European study, done independently, which draws the same conclusions. That research, by Jani-Petri Laamanen at the University of Tampere, follows the effects of housing market deregulation across the regions of Finland.

"The UK urgently needs a high-quality private rental market like the Swiss and Germans. That would hugely improve the flexibility of our economy, reduce UK unemployment, and produce a lot of extra happiness all round.", Oswald said.

Read more at: My link

[Snugglybear]

Been through the document. It doesn't mention retirement.

How would those on low pensions pay their rent?

The "high quality private rental market" would also have to have rents so low that people on low incomes could 1) afford to rent while working and 2) afford, whilst also paying the costs of living (and possibly raising a family), to pay contributions to a pension that would pay their rent and all other costs after retirement.

Or there would have to be state provision for retired people on low incomes.

Security of tenure and having a home paid for by the time you retire are, I would argue, the two main factors that keep people determined to buy a dwelling.

[Bruce Banner]

Been through the document. It doesn't mention retirement.

How would those on low pensions pay their rent?

The "high quality private rental market" would also have to have rents so low that people on low incomes could 1) afford to rent while working and 2) afford, whilst also paying the costs of living (and possibly raising a family), to pay contributions to a pension that would pay their rent and all other costs after retirement.

Or there would have to be state provision for retired people on low incomes.

Security of tenure and having a home paid for by the time you retire are, I would argue, the two main factors that keep people determined to buy a dwelling.

Security of tenure isn't a big deal, there are plenty of houses available to rent.

As for owning a house by the time you retire, I did own a house, mortgage free, but sold it and started renting three years before I retired.

[Bloo Loo]

two dumb ******* take years to work out the obvious.

House buying involves getting a mortgage when many want to do it.

Getting mass mortgages means FINANCIALISATION of the market...this puts prices up....which puts up costs of labour which makes the area uncompetitive....et voila...industry fails.

and this same dumb ******er says debt is nothing to worry about.

[Bloo Loo]

oops....

Edited May 7, 2013 by Bloo Loo

[Snugglybear]

Security of tenure isn't a big deal, there are plenty of houses available to rent.

As for owning a house by the time you retire, I did own a house, mortgage free, but sold it and started renting three years before I retired.

So your income is sufficient to pay the rent, I imagine. What about other people?

Security of tenure is a big deal, particularly for families. Read the Shelter report. Go and have a look at the Renting section.

And anyway, there may be plenty of houses available to rent where you live, but not where I do, not at a price I can afford, in an area where I'm fairly sure of not being mugged or harassed every time I go out, where I can get to work and shops without a car (which I can't afford either).

[R K]

Home ownership is falling.

So must mean good news for the labour market.

[Bloo Loo]

Home ownership is falling.

So must mean good news for the labour market.

I think normally you would be right.

But, It is still cheaper, for some, to buy than the rent....hence BTL in theory can produce a return, but only because of tax breaks and schemes.

so we have the housing costs breaking our competitiveness, and renting is EVEN WORSE.

[Scunnered]

Here he is again, in the Independent this time.

Be warned George Osborne: more home owners just really means higher unemployment.

Unemployment is a major source of unhappiness and mental ill-health.

Yet after a century of economic research, the determinants of unemployment are still imperfectly understood, and unemployment levels in the industrialised nations are around 10 per cent, with some over 20 per cent.

...

In a new paper Professor Andrew Oswald from the University of Warwick and I propose a different approach to the problem by exploring the hypothesis that high home ownership damages the labour market. Our study provides evidence consistent with the view that the housing market plays a fundamental role as a determinant of the rate of unemployment.

[continues...]

http://www.independent.co.uk/voices/comment/be-warned-george-osborne-more-home-owners-just-really-means-higher-unemployment-8612758.html

He's responding to the readers' comments: seems a bit touchy.

[Executive Sadman]

The left really are preparing us for their neo-feudal NWO, arent they?

Stock ownership down, Home ownership down, everything in the hands of those caring leftist billionaires like Buffett and Soros, saying inequality is bad, all the while creaming off profits from their inflated assets while telling us 'deflation' would be far worse.

[The Knimbies who say No]

Here he is again, in the Independent this time.

http://www.independent.co.uk/voices/comment/be-warned-george-osborne-more-home-owners-just-really-means-higher-unemployment-8612758.html

He's responding to the readers' comments: seems a bit touchy.

He's defending an "r-squared" of 0.2 as justification for the line he's put through the points and a correlation worthy of note. That seems to be a bit of a stretch imo.

Edited May 13, 2013 by cheeznbreed