Mike McCarthy, Research Assistant, Urban Initiative
When collecting data for our new Rental Housing indicator page, I was surprised to be learn that in Fall River and New Bedford, the majority of households are renter-occupied. A renter myself, I had always figured we were in the minority. The population of these cities, by my own assessment, is mostly made up of working class families striving to achieve the American Dream. Home-ownership as long been considered a cornerstone of the American Dream, and – although this type of talk is rare since the housing bust – we’ve long been told that homes help you build equity, they are long-term investments, and owning one will always be a good idea; this has been the overwhelming consensus among Americans since the Nuclear Family introduced us to the pleasures of suburban home ownership in the 1950s, homesteading for the modern age.
In the wake of a housing crisis, which according a survey conducted by the MacArthur Foundation the American public is not ready to declare over, there has been a growing chorus calling for a reexamination of the value Americans place on owning a home. One of the more interesting studies on the topic was published this year by economists David G. Blanchflower and Andrew J. Oswald, entitled Does High Home-Ownership Impair the Labor Market? In the paper, the authors propose that we not only reevaluate our views on home-ownership, but also we begin to consider the increasing need for a mobile labor market in America. Although their research focuses exclusively on the United States, when complying data for the paper the authors came across similar studies being conducted across the industrialized world. By comparing notes with colleagues, they were able to determine “that there is a strong positive correlation across the wealthy countries between their home-ownership rates and the latest unemployment rates.” In Spain, where the unemployment rate is over 20% (one of the highest in the Western world), 80% of the population are home-owners. While Switzerland has only a 3% unemployment rate and a 30% home-ownership rate.
Blanchflower and Oswald are careful not to suggest that home-owners are disproportionately unemployed, but rather they imply that areas with high levels of home-ownership are less flexible to ever changing job market and the less stable conditions under which Americans are currently finding employment; more employers are demanding more mobility from their workers, and factories and jobs, when not moving overseas, are moving to areas of the country that are more favorable to product, so it would behoove employees to choose housing that does not limit their ability to go where the jobs are. In Oswald and Blanchflower’s America, your mortgage may be a leash too short to allow you to reach the next dog bone.
The conclusions Oswald and Blanchflower draw are consistent with those found by the MacArthur Foundation’s survey. According to the responses from focus groups conducted in 10 major cities across the country, as well as thousands of phone interviews:
Americans recognize that we are a changing society that is more mobile than ever before. Three in four (75%) believe that moving to a new city or state for a job is more likely now than it was in the past, and 66% believe that people are less likely to raise a family in the same community in which they grew up. Consistent with growing concerns about the risks associated with home-ownership and the increasing mobility of the public, 72% of Americans believe that renting a home after age 30 is more likely today than it was 20 or 30 years ago.
This gave me hope for New Bedford and Fall River, because low home-ownership rates do not mean that our area has lost touch with the American Dream, it means that we are on track with the new emerging American ideal. Our resident-renters are not tied to the SouthCoast by their homes; they can leave the area in search of better prospects. On the inverse, our area is better prepared to absorb an influx of new residents as more jobs come to the area (perhaps in the form of an off-shore wind staging facility or a rail connection that makes the SouthCoast a feasible residence for young professionals working in the Hub?). Moreover, as more studies are conducted and demographics begin to shift further away from home-ownership, government agencies will need to respond by adjusting housing policy to reflect the alterations in the American housing landscape. This will be necessary since, as the MacArthur survey reported, “while roughly 35 percent of Americans rent and the other 65 percent own, the federal government spends approximately three times as much to support home-ownership as it does to support renting.”