Housing Tenure, Job Mobility and Unemployment in the UK

Abstract

This article examines the effects of housing tenure on individuals'job and unemployment durations in the UK. We examine job to job transitions and transitions from unemployment. We take account of whether or not the arrival of a job was synonymous with a non-local residential move, tenure endogeneity and unobserved heterogeneity. We find that home-ownership is a constraint for the employed and public renting is more of a constraint for the unemployed. Employed home-owners have a lower transition into employment with a distant move and unemployed public renters have a lower probability of gaining employment in more distant labour markets. The nature of housing tenure has long been blamed for discouraging spatial mobility and thereby having an impact upon labour market outcomes. In the early 1980s in the UK the main culprit was deemed to be local authority housing (McCormick, 1983). Hughes and McCormick (1981; 1987) examined the longer distance migration rates of those in local authority housing and found that they had lower longer distance migration rates compared to both owner-occupiers and those in private rented accommodation. Although, the latest research suggests that these effects may have lessened (Hughes and McCormick, 2000), the relative immobility of public renters may stem from public housing rents being below market rates, the restricted transferability within public housing, high waiting lists and security of tenure. Public renters are then 'locked in' and face higher costs if they accept a job that involves a long distance move. More recently, the blame has been pinned on private home-ownership. Oswald (1996; 1999) in a series of papers, using macro time series and cross-section data for OECD countries and regions within a number of those countries, has argued that home-own ership causes unemployment. One explanation revolves around the reduced mobility of home-owners relative to private renters owing to the costs of buying and selling homes. Subsequent and arguably more sophisticated micro-econometric tests have placed doubt upon the alleged relationship. Coulson and Fisher (2002) for the US, find that unemployment duration is shorter for home-owners relative to renters, though neither is unobserved heterogeneity nor the endogenous nature of housing tenure accounted for. Van Leuvensteijn and Koning (2004) do account for the endogeneity of home ownership and find using Dutch data that employed home-owners are less likely to become unemployed relative to employed renters. More recently, Munch et al. (2006a) using Danish data find shorter unemployment spells amongst home-owners compared to renters, after controlling for the endogeneity of home-ownership.