Homeownership, Mobility, and Unemployment

One of the themes I've been pushing in a series of posts is that geographic mobility lessens the impact of economic downturns and helps bring the economy back to its "normal" equilibrium. When Los Angeles lost lots of jobs in the defense industry in the 1991 recession, many people were willing to move to areas that were not affected by the downturn. That made it easier for the folks who remained in Los Angeles and it improved the job prospects of those that moved.

Much is made of the idea that home ownership creates positive externalities but for the most part we overlook the drawbacks. It is a part of the American Dream after all. Tim Hartford had a great column on the effects of homeownership recently (slate). Tim writes:

Wherever people seem particularly keen to own their own homes—as in the United Kingdom, Spain, and some U.S. states—employment suffers as a result. English economist Andrew Oswald has shown that across European countries, and across U.S. states, high levels of home ownership are correlated with high levels of unemployment. More conventional factors such as generous welfare benefits or high levels of unionization don't explain unemployment nearly as well as the tendency to own houses. Renting your home and staying flexible do wonders for your chances of always finding an interesting job to do.