I made two posts in July (here and here) on Public Policy for Progressives By my friend and former colleague, Jonathan Lipow.
Every now and then I’ll highlight something from the second half of a book, and this one caught my attention.
It turns out that countries with high rates of homeownership suffer from serious social pathologies, and the most important of these is that high homeownership is associated with higher unemployment.
Lipow credits British economist Andrew Oswald for this discovery. The idea is that the right job for you may be located far away from where you live. If you lose or quit your job and are a renter, it is relatively easy to give up your job to your landlord and move to a new job. But if you own your home, the transaction costs are much higher. Most people can’t afford to rent out their house or apartment and move right away. You have to sell, and anyone who has sold a house knows how troublesome the transaction usually is: high real estate agent fees, the need to wait until the right buyer is found, etc. So you may take longer to find a new job and find a lower quality job than the one you could have moved to.
Why is this a problem? Don’t people consider this when deciding whether to own or rent a home? Yes, but Jonathan’s point is that governments are tipping the balance by subsidizing homeownership.
Jonathan advocates for the government to stop promoting and subsidizing homeownership, which I agree with. He also advocates building millions of units of student housing and making available millions of rental properties currently rented by students, which I would not do. I was disappointed that Jonathan did not advocate deregulating the housing supply, as former co-blogger Brian Caplan did. Build, baby, buildBut maybe that’s one of the many reasons why I’m not a progressive.
