There was an interesting article in the New York Times last week that caught my attention: Homeownership May Actually Cause Unemployment
Homeownership is a good thing, for the individual and for society. Or so American governments, whether Republican or Democrat, have long believed. The benefits have been cited repeatedly in justifying the existence and expansion of the tax breaks given to home buyers.
But maybe it isn’t nearly as good as had been thought.
A new study by two economists concludes that rising levels of homeownership in a state “are a precursor to eventual sharp rises in unemployment in that state.” As more homes are owned, in other words, fewer people have jobs.
This week’s poll is inspired by the story, but since I only linked to it in the comments and I’m interested in seeing more broad discussion on the topic, I’m dedicating a regular post to the topic. Commenter “whatsmyname” weighed in, accusing the study authors of having ulterior motives:
Cutting taxes for the rich without decreasing tax revenues will require increasing tax revenues from the not rich. We think they’re too stupid to notice when we say it openly. Oftentimes, we are right.
Here’s the problem with that claim, though. It has been well-documented by numerous sources that most of the benefit from the mortgage interest deduction is in fact collected by “the rich.” The “not rich” have been duped into thinking it’s a great deal for them when in reality they get very little from it. Here are a few links on that topic:
- Despite Benefit Disparities, Middle Class Supports Mortgage Deduction
- Only Rich People Benefit From The Home Interest Mortgage Deduction
- The Stark Geographic Inequality of the Home Mortgage Interest Deduction
- Who Really Benefits From Interest Deductions
So what do you think about the claim that increasing homeownership in a region leads to a later increase in unemployment? I think the authors make a compelling case, although I admit that I have not yet read the entire original study. I’m a fan of homeownership, but I also understand that it’s not right for everyone, and it is ill-suited to the increasingly mobile workforce of today’s economy.
[Update: Here's the link to the original paper from the Peterson Institute for International Economics: Does High Home-Ownership Impair the Labor Market?]