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.

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.

“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.

But they say that the statistics show those patterns no matter how much they control for other variables and that the same picture emerges if they look at employment growth rather than unemployment rates. They say the pattern existed before the crash of the housing market that began in 2007 and that the statistics are not dependent on including the more recent period.

If that is true, why have few noticed it before? “The time lags are long,” they write, up to five years before a rise in homeownership hurts an area’s unemployment rate. “That gradualness may explain why these important patterns are so little known.”

Nonetheless, the idea is not new. Professor Oswald pointed to some of the data as far back as 1996, saying that in Europe as well as the United States a higher proportion of homeownership seemed to be associated with a higher level of unemployment. But other researchers soon concluded that the evidence did not support the thesis that homeowners were more likely to be unemployed than renters, and the correlation was largely ignored.

If the correlation is real, what could be the cause? The professors say they believe that high homeownership in an area leads to people staying put and commuting farther and farther to jobs, creating cost and congestion for companies and other workers. They speculate that the role of zoning may be important, as communities dominated by homeowners resort to “not in my backyard” efforts that block new businesses that could create jobs. Perhaps the energy sector would be less freewheeling in North Dakota if there were more homeowners.

Homeownership, in economists’ jargon, creates “negative externalities” for the labor market.

In Finland, there was something of a test of the thesis, the professors say. Finland changed its housing laws in the 1990s in ways that discouraged homeownership, putting the changes into effect at different times in different regions. “While homeowners are less likely to experience unemployment,” concluded Jani-Petri Laamanen, an economist at the University of Tampere who analyzed the Finnish housing market, “an increase in the rate of homeownership causes regional unemployment to rise.”

Until the credit crisis, homeownership was generally viewed in the United States as an unquestionably good thing. President George W. Bush, like his predecessors, boasted of a rising homeownership rate in his administration. He summarized the consensus in 2005 when he proclaimed June to be “National Homeownership Month.”

“The spread of ownership and opportunity helps give our citizens a vital stake in the future of America and the chance to realize the great promise of our country,” he wrote. “A home provides children with a safe environment in which to grow and learn. A home is also a tangible asset that provides owners with borrowing power and allows our citizens to build wealth that they can pass on to their children and grandchildren.”

Homeownership, the president concluded, is “a bedrock of the American economy, helping to increase jobs, boost demand for goods and services, and build prosperity.”

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2013/05/10/business/homeownership-may-actually-cause-unemployment.html?partner=rss&emc=rss