In July I made two posts (here and here). Public policy for progressives by my friend and former colleague Jonathan Lipow.
Occasionally I will touch on highlights from the later parts of the book. This one caught my attention.
It turns out that countries with high homeownership rates suffer from serious social pathologies. And the most important of these is that high home ownership is associated with high unemployment.
Lipow gives credit for this discovery to British economist Andrew Oswald. The idea is that the right job for you is somewhere far from where you live. If you lose or quit your job and you’re renting, it’s relatively easy to notify your landlord and move into that new job. However, if you are the owner, the transaction costs are much higher. Most people won’t have the extra wealth to simply rent out the house or apartment and then move; they will have to sell, and anyone who has sold a house can tell you how cumbersome a transaction usually is: high real estate agent fees, waiting for the right buyer, etc. So you will spend longer looking for a new job and perhaps find a job that is inferior to the job you could have moved to.
Why is this a problem? Will people not take that into account when deciding whether to buy or rent? Yes. But Jonathan’s point is that the government is putting its finger on the scale by reducing home ownership.
That is why Jonathan advocates that the government should move away from promoting and subsidizing home ownership. I agree. He advocates going further by building millions of student housing units, making available millions of rental properties that are now rented out by students. I wouldn’t do that. I was disappointed that Jonathan didn’t simply advocate for deregulation of housing supply, as former co-blogger Bryan Caplan did in 2011. Build, baby, build. But maybe that’s one of the many reasons why I’m not progressive.