Does Homeownership Lead to Longer Unemployment Spells? The Role of Mortgage Payments

Abstract

This paper examines the impact of housing tenure choice on unemployment duration in Belgium using EU-SILC micro data. We contribute to the literature in distinguishing homeowners with mortgage payments and outright homeowners. We simultaneously estimate unemployment duration by a mixed proportional hazard model, and the probability of being an outright homeowner, a homeowner with mortgage payments or a tenant by a mixed multinomial logit model. To be able to correctly identify the causal influence of different types of housing tenure on unemployment duration, we use instrumental variables. Our results show that homeowners with a mortgage exit unemployment first. Outright owners stay unemployed the longest. Tenants take an intermediate position. Moreover, our results reveal the different share of mortgage holders within the group of homeowners as a possible explanation for the discrepancy between former contributions to this literature.JEL classification: C41, J64, R2.

Home-ownership, unemployed’s job search behavior and post-unemployment outcomes

“…Using data from the BHPS they find that home-ownership is a constraint for the employed, because they have a lower probability of gaining employment in more distant labor markets, while public renting is a constraint for the unemployed, because they are less likely to enter a distant job market compared to private renters. Finally, a recent study by Baert, Heylen, and Isebaert (2014) shows that home-owners with a mortgage have shorter unemployment durations than outright owners because of the liquidity constraints that provide strong incentives to find a job soon, while Kantor, Nijkamp, and Rouwendal (2012) provide evidence that leveraged home-owners are more likely to accept longer commuting distances.…”

The Socioeconomic, Demographic, and Political Effects of Housing in Comparative Perspective

“…Ownership is about more than title, as many “owners” discovered in the course of the recent foreclosure crisis. In fact, the surge in foreclosures spurred research testing whether financial strain from mortgages and declining property values attenuates ownership effects (Baert et al 2014, Tumen & Zeydanli 2013). …”

“…Owners do not appear to change jobs less than renters in Europe, but they recover from job loss faster (van Ewijk & van Leuvensteijn 2009). Mortgage terms moderate such effects, as mortgagors have shorter spells of unemployment than do outright owners or renters (Baert et al 2014). Almost all of this research has been conducted in the US or Western Europe.…”

Did the post-1986 decline in the homeownership rate benefit the New Zealand labour market? A spatial-econometric exploration

“…In contrast, those who own their property outright may have higher reservation wages in job search. Baert et al (2014) find some evidence in favour of these expectations, using Belgian microdata. They conclude that homeowners with a mortgage exit unemployment first, while outright owners stay unemployed the longest.…”

“…As noted in the previous section, Baert et al (2014) and Kantor et al (2015) argue that homeowners are not a homogenous group with respect to their labour market behaviour. Generally, we would expect that those who own their homes with a mortgage will have greater search intensity, particularly if the mortgage is large, as the mortgagee must usually have employment to be able to pay the mortgage.…”