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Housing equity, residential mobility and commuting
Abstract
Highly productive economies require a flexible labor force with workers that move in accordance with the changing demand for goods and services. In times with falling housing prices, the mobility of home owning workers may be hampered by a lock-in effect of low or even negative housing equity. This paper explores the effect of housing equity on both the residential mobility and the commuting pattern of homeowners. We merge administrative registers for the Danish population and properties and get highly reliable micro data for our analysis. We find that low and negative housing equity substantially reduces residential mobility among homeowners. The negative effect of locked-in low equity families on labor market mobility may be mitigated by commuting. However, our results show that family heads in low or negative equity homes are not found to commute more than households with higher housing equity, but also that a considerable fraction of home owning family heads commute. The analysis of the joint decision of homeowners to commute or move shows that the option of moving, as an alternative to not moving and not commuting, is chosen by five to six percent of homeowners with low housing equity, while the option of not moving but commuting is chosen by 60 percent.
... Andersson og Mayock (2014) studerer hvordan finanskrisen i USA førte til en «innlåsingseffekt» hvor mobiliteten ble begrenset av at folks boliglån ble høyere enn boligprisene etter boligkrakket. Det er også vist i en studie fra Danmark at innlåsingseffekten har substansiell effekt på arbeidsmarkedsmobiliteten (Bloze og Skak 2016). En slik innlåsingseffekt kan motvirkes av lengre reisevei, men de finner ikke at folk med negativ eller lav egenkapital har lengre reisevei enn andre. ...
I denne rapporten studerer vi preferanser for geografisk mobilitet hos militært personell. Med det mener vi hvordan forsvarsansatte vurderer belastning og betalingsvillighet for dagpendling, ukependling og flytting.
... For homeowners, rising housing prices increase their wealth and promote their aspiration to live in other areas (Peng & Tsai, 2019;Zang et al., 2015). In contrast, falling housing prices will induce an equity lock-in effect of lower or even negative housing equity, essentially impeding their movements (Bloze & Skak, 2016;Bricker & Bucks, 2016;Chan, 2001;Foote, 2016). Moreover, Peng and Tsai (2019) argued that housing prices' impact on migration might be asymmetric. ...
The relationship between housing prices and population migration is a crucial and heated topic worldwide. However, few studies discussed how housing price influences the skill composition of migrants. This paper aims to bridge this knowledge gap to investigate China's internal migration, theoretically and empirically. The research question is: Has a higher price crowded out low-skilled migrants and thus led to a positive selection of migrants? To address it, this study introduces housing costs into the self-selection model of migration to conduct a theoretical analysis. Then, this study develops an empirical model that estimates the effect of housing prices on migrants' skill levels, utilizing the China Migrants Dynamic Survey (CMDS) data in 2017 and other relevant data sources. Our analysis demonstrates that a 1% increase in housing prices gives rise to an extra 0.297 years of schooling among migrants. This implies that a higher housing price has significantly discouraged low-educated migrants. Such education selection is more significant among young migrants who live in rental or self-purchased accommodation and work with private enterprises. Also notable is the severer positive selection of migrants who intends to settle in the migrant cities. This study has shed light on the uneven conditions of migrants under the influence of housing unaffordability with policy implications.
... A falling housing price restricts the household's financial ability and reduces population mobility. It results in the so-called equity lock-in effect (Blozea & Skak, 2016;Bricker & Bucks, 2016;Chan, 2001;Engelhardt, 2003;Ferreira, Gyourko, & Tracy, 2010Foote, 2016;Han, 2010;Modestino & Dennet, 2013;Seko, Sumita, & Naoi, 2012;Sterk, 2015) Furthermore, some studies have argued that a rise in housing prices increases a household's housing equity, making it easier for households to move (Disney, Gathergood, & Henley, 2010;Kiel, 1994). According to the above-mentioned studies, the influence of the housing price on migration is positive. ...
A change in housing prices has a profound impact on households' housing equity and future moving decisions. While most previous studies focus on discussing the mobility lock-in effect due to housing price depreciation, revealing that there is a positive relationship between housing prices and migration, this study reexamines their relationship by using the panel cointegration method and city-level panel data for Taiwan during the 1994–2016 period. The empirical results reveal that migration and housing prices are cointegrated, and the influence of housing prices on migration is significantly positive in the long run. However, the influence of housing price changes on migration is not as significant as expected in the short run. To further examine their short-run relationships, we use quantile regression and the results show that the influence of housing price changes on migration is significantly negative below the 0.5 quantile, but it turns out to be significantly positive in the 0.9 quantile. The influence of housing price changes on migration is not significant between the 0.5 and 0.8 quantiles. We conclude that the influence of housing price changes on migration might be asymmetric in the short run.
We review developments in research on within-country migration, focusing on internal migration in the United States. We begin by describing approaches to modeling individuals’ migration decisions and equilibrium outcomes across local areas. Next, we summarize evidence regarding the impact of migration on individuals’ outcomes, implications of migration for local labor market adjustment, and interactions between migration and housing markets. Finally, we discuss evidence on the efficacy of policies aimed at encouraging migration and conclude by highlighting important unanswered questions that are critical for informing migration-related policy. (JEL I23, I38, J31, J61, J62, R23, R38)
Norway. One out of four Norwegian municipalities is partly covered by glaciers and permanent snow. In the winter seasons of 1983–2020, there is a decline in snow depth from 50 to 35 cm on average (based on 41 popular second-home areas in the
mountains). Results of the fixed effects Poisson estimator with spatial elements show that there is a significant and positive relationship between natural snow depth in the municipality and the number of second homes started. There is also a
significant and negative relationship between the number of new second homes in the municipality and a scarcity of snow in the surrounding municipalities. However, the magnitude of both effects is small. Estimates also show a strong positive
relationship between the proportion of surface covered by permanent snow or glaciers in the municipality and new second homes. This implies that a decline in permanent snow and glaciers may make these areas less attractive for the location of second homes.
The U.S. federal government awards billions of dollars of contracts annually to private-sector firms to produce a wide range of goods and services. However, little is known about how a reduction in federal procurement, also referred to as fiscal consolidation, impacts local labor markets. In this paper, we leverage the institutional details of the Budget Control Act of 2011 (BCA) and highly detailed transaction-level data for procurement by all federal agencies to estimate the effect of fiscal consolidation on local employment and wages. Our identification strategy uses a shift-share instrument and is based on the exogeneity of the BCA-induced spending cuts across industries, i.e. exogenous shocks. Our results show that relative to wages, employment appears to be the key margin for local labor market adjustment in the wake of consolidation. In particular, we estimate that a $1 million reduction in federal procurement spending reduces employment by more than 10 jobs, while a $1 decline in spending only reduces aggregate wages by about $0.19. We also show that the local labor market effects of consolidation depend on the sectors receiving federal dollars. Federal contracts in high labor-intensive industries reduce employment by more than those in low labor-intensive industries, while the effect on aggregate wages is relatively modest and constant across sectors. These findings have implications both for understanding regional economic development and for improving regional resiliency to negative demand shocks.
We review developments in research on within-country migration, focusing on internal migration in the U.S. We begin by describing approaches to modelling individuals' migration decisions and equilibrium outcomes across local areas. Next, we summarize evidence regarding the impact of migration on individuals' outcomes, implications of migration for local labor market adjustment, and interactions between migration and housing markets. Finally, we discuss evidence on the efficacy of policies aimed at encouraging migration and conclude by highlighting important unanswered questions that are critical for informing migration-related policy.
What explains variation in populist radical right (PRR) support within Western democracies? Specifically, why is contemporary PRR support often and increasingly stronger in areas seemingly detached from the effects of globalization, transnationalism, or immigration, the key issues these parties emphasize? This study articulates a theory of residential constraints to deepen understanding of these spatial patterns. I hypothesize that when citizens are residentially constrained—that is, when their means of reacting to local conditions and “voting with their feet” are limited—they are more likely to support PRR parties. To test this claim, I use a multimethod research design and exploit both quantitative and qualitative evidence from France, an important case of long-standing and geographically divided PRR support. I demonstrate that the PRR performs well in areas where locals’ access to services and opportunities is compromised and where opportunities and incentives to relocate are blocked by residential constraints. Residential constraints thus generate a set of relative economic grievances and render them highly salient in localities that may otherwise appear unaffected by more objective hardships and structural decay.
Although well-known that high CLTV is necessary for mortgage default, the amplifying effect of high PTI that can force families to move has received limited attention. Using the 1985–2013 AHS panel, we show that high CLTV by itself has little effect on mobility, but high PTI prompts families to move and especially so when CLTV is high. Evidence also indicates that high PTI and CLTV discourage home maintenance. Our estimates suggest that loan modifications that lower PTI will likely be more effective at helping underwater families to remain in their homes and avoid mortgage default as compared to policies that lower CLTV.
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This study explores perceived and real effects of a human-made environmental crisis (the Flint water crisis) on residential mobility and housing demand in the weak market city of Flint, Michigan, USA. We surveyed Flint residents in summer 2016 and found that a large proportion of homeowners believed the water crisis negatively affected their property values; more than half wanted to leave the city but felt constrained by the inability to sell their homes; and one-fifth considered abandoning their homes to leave the city. We used regression models to examine predictors of these responses, and spatial statistics to examine whether responses clustered in the city. Then, to see if the perceptions of homeowners reflected actual changes in the housing market caused by the crisis, we used descriptive statistics, maps, and repeated measures ANOVA models to examine changes in home sales prices and mortgages originations in Flint from 2012–2017, before and after the start of the crisis. The results indicate the water crisis had no discernable effect on the city’s housing market, likely because the market was incredibly weak prior to the crisis. The severe lack of housing demand irrespective of the crisis potentially contributed to residents’ perceptions of constrained mobility.
Abstract. Exploring the Ties Between Commuting and Residence Change in Spain: An Analysis with Individual Data
This article discusses the determinants of two of the most significant types of workers’ mobility: travel-to-work commuting and changes in the place of residence. It explores, in particular, the extent to which these phenomena influence each other. Accordingly, two alternative models are estimated using the multinomial logit technique. The individual data used come from the Spanish Population Census of 2011, which allows updating previous works that did not take into account the effects of the Great Recession. A significant contribution of the paper is the use of labour market areas (LMAs) as territorial reference units. Each of these areas brings together closely linked municipalities in terms of commuting flows and are delimited by boundaries that are infrequently crossed in the course of such trips; two features which make them relevant for this analysis in contrast with the alternative of using administrative territorial units as the reference geography. The recodification of the census microdata by the INE according to this territorial reference makes it possible to differentiate between migrations (change of residence involving different LMAs) and simple residential moves within a given LMA (which therefore make a change of workplace unnecessary due to the specific accessibility conditions in the LMA). The results confirm that there is a significant link between both types of mobility (commuting and migration/residential mobility) and, in particular, that changes of residence seem to move workers away from their places of work rather than shortening their commuting trips.
Keywords: commuting; residential change; local labour market
Fixed-effects models have become increasingly popular in social-science research. The possibility to control for unobserved heterogeneity makes these models a prime tool for causal analysis. Fixed-effects models have been derived and implemented for many statistical software packages for continuous, dichotomous,
and count-data dependent variables. Chamberlain (1980, Review of Economic Studies 47: 225–238) derived the multinomial logistic regression with fixed effects. However, this model has not yet been implemented in any statistical software package. Possible applications would be analyses of effects on employment status,
with special consideration of part-time or irregular employment, and analyses of effects on voting behavior that implicitly control for long-time party identification rather than measuring it directly. This article introduces an implementation of this model with the new command femlogit. I show its application with British election panel data.
This paper draws on six waves of Japanese household longitudinal data (Keio Household Panel Survey, KHPS) and estimates a
conditional fixed effects logit model to investigate the effects of housing equity constraints and income shocks on own-to-own
residential moves in Japan. By looking at contemporaneous extended Loan-to-Value (ELTV) and extended Debt-to-Income (EDTI)
ratios under the recourse loan system, we examine whether housing equity constraints and negative income shocks have any impact
on own-to-own residential moves. Taking account of the specific nature of the recourse loan system in Japan, we further investigate
whether these effects are different between positive and negative equity households. The estimation results show that housing
equity constraints and negative income shocks significantly deter own-to-own residential moves for positive equity households.
KeywordsResidential mobility–Housing equity constraint–Conditional fixed effects logit model–Loan-to-value ratio–Debt-to-income ratio–Negative equity–Japan–Recourse loan
In this paper, we scrutinise Oswald's evidence that home-ownership and unemployment are correlated across the US states. In order to abstract from state fixed-effects in levels, we analyse the cross-sectional variation in changes in home-ownership and unemployment rates between 1970 and 1990. After duplicating (nearly) Oswald's result, we illustrate the importance of weighting the state observations by the fraction of total US households in 1970 that resided in the respective states and of abstracting from the ageing of the population between 1970 and 1990: this causes Oswald's correlation to to disappear. Secondly, we estimate the relationship for six different age-classes and for household heads and total population. We find that the relationship is non-existent for both young households and old households, but exists for middle-aged households. Young households have accumulated little wealth and have had less time to become attached to the geographical area than middle-aged households and thus are more likely to respond to unemployment by relocating. Older households' employment cannot be greatly affected by home-ownership because their members are largely not in the labour force. Unemployment rates of household heads are affected less by tenure than those of the population as a whole.
This paper is concerned with the analysis of commuting distances. The development of commuting distances has become a subject of political concern because of the large flows of traffic involved which are concentrated in a few hours each day and cause considerable congestion problems as well as environmental damage. The economic theory of search will be proposed as a theoretical background which motivates the modelling of commuting distance distributions. For the empirical analysis, a sub-sample is used of respondents of the Housing Demand Survey of 1985, approached again in 1988. Commuting distances are discussed in relation to household characteristics such as the number of persons, the presence of a spouse or partner and her/his employment status. The apparent rapid increase in commuting distances is due in large part to changes in the employment situation. People who change job will often commute over a longer distance after the change occurs. Changes in housing situation are more or less neutral in their effect on the average commuting distances.
We use the 1999–2009 Panel Survey of Income Dynamics to estimate household move probabilities as a function of, among other things, current housing equity. The lock-in effect supposes that mobility decreases with the mortgage loan-to-value ratio, particularly as equity becomes negative. We find that while owners do move less than renters, the move probability increases as homeowners become underwater. The propensity to move out of state in particular increases dramatically for sand state homeowners who have negative equity. There is no lock in effect from negative equity.
This paper investigates the relationship between home equity and household mobility using a dataset that allows us to construct home equity measures that are more accurate than those that have been used in previous work on the equity-mobility hypothesis and permit us to disentangle mortgage default induced mobility from other types of mobility. Furthermore, the countervailing nature of down payment e¤ects and default-induced mobility suggest a U-shaped relationship between home equity and mobility. Given the prevalence and depth of negative equity during the recent housing, it is a priori ambiguous whether equity erosion has contributed to increased or decreased household mobility. Preliminary results for the state of Florida show that the declining equity significantly reduces mobility. Our results also suggest that loan payment default behavior of underwater borrowers have contributed to significantly hamper these effects.
A recent decline in geographic mobility in the United States may have been caused in part by falling house prices, through the "lock in" effects of financial constraints faced by households whose housing debt exceeds the market value of their home. I analyze the relationship between such "house lock" and the elevated levels and persistence of unemployment during the recent recession and its aftermath, using data that covers the period through the end of 2011. Because house lock will extend job search in the local labor market for homeowners whose home value has declined, I focus on differences in unemployment duration between homeowners and renters across geographic areas differentiated by the severity of the decline in home prices. The empirical analyses rely on microdata from the monthly Current Population Survey (CPS) files and an econometric method that enables the estimation of individual and aggregate covariate effects on completed unemployment durations in "synthetic cohort" (pseudo-panel) data. The estimates indicate the absence of a meaningful house lock effect on unemployment duration.
The study presents a very simple model in which housing equity can influence mobility, and then estimates parameters that gauge the impact of housing equity, local house prices and other variables associated with household structure and change on residential movement within the UK. The data come from the British Household Panel Study over 1992-2008, which allow us to use within‐person variation to identify the parameters. The parameter estimates indicate that estimates based on cross‐section variation are seriously biased in our analysis. We check the robustness of our results to errors in measuring equity using an instrumental variable estimator. Our main finding is that an increase in a household's housing equity encourages residential mobility substantially, and a decline discourages it.
The purpose of this paper is to empirically investigate the proposition that residential decisions are made with reference to the male head of household's job location, disadvantaging females in the labor market. A sample of approximately 50,000 adults in two-earner households in urban areas distributed across the United States is selected from public use microdata from the 1980 census and used to estimate a simultaneous model to explain commute to work behavior of men and women. The model is estimated separately for households that did and did not change residences in the past year. The impacts of the new residences on the commute times of both male and female workers, holding other variables constant, are compared. We conclude that residential selection does favor males relative to females, although there is evidence that this advantage is eliminated as the ratio of female to male earnings in the same household narrows.
This paper provides updated estimates of the impact of three financial frictions – negative equity, mortgage lock-in, and property tax lock-in – on household mobility. We add the 2009 wave of the American Housing Survey (AHS) to our sample and also create an improved measure of permanent moves in response to Schulhofer-Wohl’s (2011) critique of our earlier work (Ferreira, Gyourko and Tracy (2010)). Our updated estimates corroborate our previous results: negative equity reduces household mobility by 30 percent, and $1,000 of additional mortgage or property tax costs reduces household mobility by 10%-16%. Schulhofer-Wohl’s finding of a slight positive correlation between mobility and negative equity appears due to a large fraction of false positives, as his coding methodology has the propensity to misclassify almost half of the additional moves it identifies relative to our measure of permanent moves. This also makes his mobility measure dynamically inconsistent, as many transitions originally classified as a move are reclassified as a non-move when additional AHS panels become available. We conclude with directions for future research, including potential improvements to measures of household mobility.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
It has been argued that greater spatial constraints are imposed on the job searches of women workers and that these greater constraints account for some of the gender wage gap. All researchers agree that women commute shorter distances to work than men. In addition, some researchers have argued from indirect evidence that two-earner households give greater weight to husbands' job opportunities when choosing a residential location. In this paper, we use data on two-earner households from the 1980 Public Use Microdata Sample (PUMS) of the US Census for the Detroit and Philadelphia SMSAs to quantify the effects of residential location and of gender differences in commuting behaviour on the gender gap in wages. First, we find that within white households wives encounter relatively greater spatial variation in wages than their husbands but that there is less of a gender difference among black households. Second, we analyse the simultaneous effects of commuting and residential constraints on wages. We find for both cities, and for both blacks and whites, that the gender wage gap is not changed in any significant way by altering women's intrametropolitan residential and job locations.
Many researchers, policymakers, and pundits have argued that the housing crisis may harm labor markets because homeowners who owe more than their homes are worth are less likely to move to places that have productive job opportunities. I show that, in the available data, negative equity does not make homeowners less mobile. In fact, homeowners who have negative equity are slightly more likely to move than homeowners who have positive equity. Ferreira, Gyourko, and Tracy’s (2010) contrasting result that negative equity reduces mobility arises because they systematically drop some negative-equity homeowners’ moves from the data
This paper investigates how rent control affects mobility in the Danish housing market. We apply a proportional hazard duration model, that encompasses both the presence of left truncated tenancy durations, right censored observations and allows for a very flexible specification of the time dependency of the hazard rate. Tenancy mobility is severely reduced by rent control. For a typical household in the private rental sector tenancy duration is found to be more than six years longer if the apartment belongs to the 10% most regulated units than if it belongs to the 10% least regulated units.
Using two decades of American Housing Survey data from 1985 to 2007, we revisit the literature on lock-in effects and provide new estimates of the impacts of negative equity and rising interest rates on the mobility of owners. Both lead to substantially lower mobility rates. Owners suffering from negative equity are one-third less mobile, and every added $1000 in real annual mortgage costs lowers mobility by about 12%. Our results cannot simply be extrapolated to the future, but they do have potentially important implications for policy makers concerned about the consequences of the housing bust that began as our data series ended. In particular, they indicate that we need to begin considering the consequences of lock-in and reduced household mobility because they are quite different from those associated with default and higher mobility.
In more or less every country in the OECD, unemployment was lower in the decades following the second world war than in any other period of comparable length, either before or since. For example, in Britian unemployment has exceeded 5% in every peacetime decade from 1850 onwards except for the 1950s and 1960s. Alternatively, average unemployment in the 1980s and 90s is higher, generally much higher, than in the 1960s in every country considered. Whey this is so is one of the questions which underlies this paper. A second question, concerns the causes of the enormous variation in unemployment rates across the OECD countries? As we shall see, these are difficult questions. The first, in particular, is one for which we do not have a complete answer. What we lack is a satisfactory empirical explanation of the time series pattern of OECD unemployment. In what follows, we remain focused on these two questions, first considering the theoretical background and then looking at some possible answers. We finish with some speculative conjectures on the first question.
U.K. commentators have noted that the U.K. housing market may hinder labor market flexibility. The present paper uses U.K. household longitudinal data (BHPS) for the early 1990s and estimates single and competing risk discrete time duration models of residence duration to investigate the impact of negative housing equity on residential moves. Strong evidence for an adverse impact on mobility is found, along with results to suggest that the home-owners do not move in response to changing labor market conditions. Negative equity in the early 1990s therefore exacerbated housing market related rigidities in the job-matching process.
Falling house prices have caused numerous homeowners to suffer capital losses. Those with little home equity may be prevented from moving because of imperfections in housing finance markets: the proceeds from the sale of their home may be insufficient to repay their mortgage and provide a down payment on a new home. A data set of mortgages is used to examine the magnitude of these constraints. Estimates show that average mobility would have been 24% higher after 3 years had house prices not declined, and after 4 years, it would have been 33% higher. Among those with high initial loan-to-value ratios, the differences are even greater.
This article investigates the effects of homeownership on labour mobility and unemployment duration. We distinguish between finding employment locally or being geographically mobile. We find that homeownership hampers the propensity to move for job reasons, but improves the chances of finding local jobs, which is in accordance with the predictions from our theoretical model. The overall hazard rate into employment is higher for homeowners, such that there is a negative correlation between homeownership and unemployment duration. Our empirical findings thus contradict the so-called Oswald hypothesis, even if support is found for the main mechanism behind the hypothesis, namely that homeownership hampers mobility. Copyright 2006 The Author(s). Journal compilation Royal Economic Society 2006.