Health Care and the Housing Crisis

Abstract

We show that the percentage of people in a county without health insurance in 2005 is a strong and robust predictor of subsequent home value declines in that county during the housing crisis. Our preferred estimates indicate that a 10 percentage point increase in uninsured county residents in 2005 is associated with approximately 4 additional percentage points of home value decline between 2006 and 2010. We also provide evidence that this relationship was essentially nonexistent in Massachussets, where comprehensive health care reform was passed just before the housing crisis began. Our results contribute to the growing literature on the financial benefits of obtaining health insurance, but we are the first to show a link between health insurance and housing market outcomes. We also add to the literature on the household-level determinants of the recession; considering that uninsured households are likely to pay medical debt with consumer credit or home equity loans, our results shed light on one mechanism by which pre-recession household leverage may have exacerbated the recession. These results have important policy implications as the federal government considers a revision of the Affordable Care Act.