Residential Mobility, Housing Wealth and the Labour Market

UK commentators have noted for some time that the structure of the UK housing market may be detrimental to labour market flexibility. The early 1990s experience of negative housing equity which affected over 20% of home buyers may have “locked” home owners into property, reducing mobility and worsening further the flexibility of the labour market. The present paper uses UK household longitudinal data (BHPS) for the early 1990s, and estimates single and competing risk discrete time duration models of residence duration to investigate these issues. Strong evidence for the negative impact on mobility of negative equity is found, along with results that suggest that the home-owners do not tend to move in response to changing labour market conditions. Negative equity in the early 1990s therefore exacerbated housing market related rigidities in the job matching process.