Post by unlawflcombatnt on May 21, 2013 11:53:47 GMT -6
from OC Housing News
Home Ownership Hurts Economy?
ochousingnews.com/news/new-report-may-kill-the-home-mortgage-interest-deduction
"Home ownership hurts the economy. That’s the startling conclusion of a new report that demonstrates a strong correlation between high rates of home ownership and high rates of unemployment. While correlation may not be causation, the correlation is too strong to be ignored. Whether or not home ownership itself is the cause of unemployment is debatable, but whether it does or not, the report will be useful to politicians who need political cover to scale back the home mortgage interest deduction.
I’ve covered the merits of the home mortgage interest deduction in many posts. The bottom line is that the HMID does nothing to improve home ownership rates, it inflates the values of houses in neighborhoods dominated by high wage earners, and it’s very costly to the federal government. The only reason we still have it today is because lobbyists for realtors and homebuilders have fought successfully to maintain their subsidies. Politicians in Washington want to cut back this subsidy, but they need political cover to justify their decision. Trimming the budget is a good reason, and now with this report, they can also argue that the subsidy hurts the economy by increasing unemployment."
By FLOYD NORRIS —
May 9, 2013
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.
That’s a remarkable conclusion. Identifying the actual cause is a challenge because it’s difficult to conceive a reason why owning anything, stocks, bonds, gold, real estate, would cause unemployment.
The study, by David G. Blanchflower of Dartmouth and Andrew J. Oswald of the University of Warwick in England, does not argue that homeowners are more likely to lose jobs than are renters. But it does argue that areas with high and rising levels of homeownership are more likely to be inhospitable to innovation and job creation and to have less labor mobility and longer commutes to work.
Why would this be so? I can see how labor mobility would be hindered because it’s much more difficult to sell and repurchase a house than it is to change rentals, but how would home ownership stifle innovation?
“We find that a high rate of homeownership slowly decimates the labor market,” Professor Oswald said.
At the simplest level, the authors of the study, released by the Peterson Institute of International Economics, point to the fact that the five states with the largest increase in homeownership from 1950 to 2010 — Alabama, Georgia, Mississippi, South Carolina and West Virginia — had a 2010 unemployment rate that was 6.3 percentage points higher than in 1950. The unemployment rates in the five states where homeownership went up the least — California, North Dakota, Oregon, Washington and Wisconsin — rose 3.5 percentage points during the period.
Such statistics are not persuasive by themselves, and the professors know it. Many factors obviously influence unemployment rates in any given state. North Dakota’s current boom stems from energy deposits, which would have been there no matter who owned the land.
Is it just random chance that the states with the largest gains in home ownership had the highest rates of unemployment while the states with the lowest gains in home ownership had some of the lowest? Correlations that strong are difficult to ignore."
Home Ownership Hurts Economy?
ochousingnews.com/news/new-report-may-kill-the-home-mortgage-interest-deduction
"Home ownership hurts the economy. That’s the startling conclusion of a new report that demonstrates a strong correlation between high rates of home ownership and high rates of unemployment. While correlation may not be causation, the correlation is too strong to be ignored. Whether or not home ownership itself is the cause of unemployment is debatable, but whether it does or not, the report will be useful to politicians who need political cover to scale back the home mortgage interest deduction.
I’ve covered the merits of the home mortgage interest deduction in many posts. The bottom line is that the HMID does nothing to improve home ownership rates, it inflates the values of houses in neighborhoods dominated by high wage earners, and it’s very costly to the federal government. The only reason we still have it today is because lobbyists for realtors and homebuilders have fought successfully to maintain their subsidies. Politicians in Washington want to cut back this subsidy, but they need political cover to justify their decision. Trimming the budget is a good reason, and now with this report, they can also argue that the subsidy hurts the economy by increasing unemployment."
By FLOYD NORRIS —
May 9, 2013
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.
That’s a remarkable conclusion. Identifying the actual cause is a challenge because it’s difficult to conceive a reason why owning anything, stocks, bonds, gold, real estate, would cause unemployment.
The study, by David G. Blanchflower of Dartmouth and Andrew J. Oswald of the University of Warwick in England, does not argue that homeowners are more likely to lose jobs than are renters. But it does argue that areas with high and rising levels of homeownership are more likely to be inhospitable to innovation and job creation and to have less labor mobility and longer commutes to work.
Why would this be so? I can see how labor mobility would be hindered because it’s much more difficult to sell and repurchase a house than it is to change rentals, but how would home ownership stifle innovation?
“We find that a high rate of homeownership slowly decimates the labor market,” Professor Oswald said.
At the simplest level, the authors of the study, released by the Peterson Institute of International Economics, point to the fact that the five states with the largest increase in homeownership from 1950 to 2010 — Alabama, Georgia, Mississippi, South Carolina and West Virginia — had a 2010 unemployment rate that was 6.3 percentage points higher than in 1950. The unemployment rates in the five states where homeownership went up the least — California, North Dakota, Oregon, Washington and Wisconsin — rose 3.5 percentage points during the period.
Such statistics are not persuasive by themselves, and the professors know it. Many factors obviously influence unemployment rates in any given state. North Dakota’s current boom stems from energy deposits, which would have been there no matter who owned the land.
Is it just random chance that the states with the largest gains in home ownership had the highest rates of unemployment while the states with the lowest gains in home ownership had some of the lowest? Correlations that strong are difficult to ignore."