Does Homeownership Hinder Labor Market Activity? Evidence From Housing Privatization and Restitution in Brno.

Abstract

We study the effects of homeownership on labor force participation and unemployment. We exploit housing privatization and restitution after the fall of communism as a source exogenous assignment of homeowner/renter status, using a unique dataset from the city of Brno, Czech Republic. We do not find any evidence of homeownership hindering labor force participation. In fact, our estimates suggest that homeownership reduces unemployment by four to six percentage points. Homeownership appears to decrease the risk of unemployment by about one third to one half, relative to renters. The estimated effects on labor force participation are systematically around zero.

Homeownership, mobility, and unemployment: Evidence from housing privatization

“…On the other hand, Lis and Zwierzchlewski (2015) state that Polish municipalities sold mainly the dwellings of a relatively higher standard than the average in the municipal stock. Mikula and Montag (2019) look at housing privatization in Brno, the second largest city in the Czech Republic. They report that the procedure for designation of houses for privatization was not regulated by the law or any city directive and is not documented in public sources.…”

“…In Brno, the purchase price was determined according to the Mayor's Office directive no. 3/1996 as follows (Mikula and Montag, 2019). The baseline administrative price was set based on a directive of the Ministry of Finance (directive no.…”

Housing Privatization in Transition Countries: Institutional Features and Outcomes

“…In addition, privatization to individual tenants would result in mixed ownership whereas some apartments are owned by individuals and others by the municipality, leading to increased running costs (Sýkora, 2003). Although other forms of privatization were possible, using 1991 and 2011 census data, Mikula and Montag (2019) report that tenant coops were the actual privatizers in at least 84% privatized properties in Brno. The only significant exception from the rule was former East Germany, where, similarly as in the former West Germany, a large part of the privatized housing stock was sold to institutional investors (Scanlon and Whitehead, 2008).…”

“…In one town (Sokolov), Sykora (2003) reports discounts of 80%. In Brno, the second largest city in the country, the discounts were between 35 or 65%, depending on whether the purchase was on credit (without interest being charged) or the price was paid upfront (see Mikula and Montag, 2019, for details about housing privatization in Brno). However, these were discounts from the administratively set valuations of privatized properties, which were likely to be set low to begin with.…”