Housing and the Labor Market

Abstract

Since the experiences of the housing boom and bust in the first decade of the 21st century, there has been growing interest in studying the connections between housing markets and labor market activity. Notably, a number of theoretical works have attempted to understand how housing tenure affects labor market outcomes. Interestingly, despite the inherent appeal of the logic that homeownership reduces worker mobility, much of this research does not predict that homeownership is associated with inferior outcomes when compared to renting. Thus, it is important to also examine the implications of homeownership empirically. Although initially focused on macroeconomic studies looking at owner-occupation rates and unemployment across countries, the empirical literature expanded by introducing microeconometric research that examines an individual’s tenure status and labor market results. To begin, it appears that unemployed homeowners may not necessarily suffer from longer unemployment durations than other workers. Further, they may also be less likely to become unemployed; however, homeownership might be associated with lower wages because homeowners are limited in their job searches. In particular, homeowners suffering from negative equity seem to approach search efforts and job acceptance rates differently from other workers. Yet, such individuals are unlikely to default on their mortgages unless they experience adverse labor market shocks.