Want to keep your job? Rent, don't buy!

November 7, 2013: 4:46 AM ET
home ownership unemployment rates
Spain has high levels of home ownership and unemployment. Germany and Switzerland are at the opposite end of the spectrum.
LONDON (CNNMoney)

Encouraging young people to buy a home may be storing up trouble for the future in the shape of higher unemployment, according to a new study.

Researchers from Dartmouth College in New Hampshire and the U.K.'s University of Warwick say that when countries see an increase in home ownership, unemployment begins to rise a few years later, partly because people become more reluctant to move to find a job.

As well as reducing labor market mobility, the researchers said home ownership leads to longer commutes, which are a waste of time and money.

Homeowners are also more likely to be opposed to new businesses opening in their neighborhoods, stifling entrepreneurship.

Related: Homeowners are ditching brokers

The study was based on recent and historical data from the U.S. and other developed nations. It acknowledges that other factors contribute to the level of unemployment in an economy but argues that the link with home ownership is clear.

"The effects are strikingly large," stated the researchers in their report. "In the long run, doubling home ownership in a state can lead to more than a doubling of the unemployment rate."

The researchers said the trend had been particularly marked since the 1980s.

"We need to break the obsession with home ownership," Professor Andrew Oswald from the University of Warwick told CNNMoney. "You erode the flexibility of the labor market and it causes jobs to slowly disintegrate."

Oswald compared Switzerland and Spain to illustrate his point, noting that Spanish home ownership and unemployment are high while Swiss levels are surprisingly low.

Related: Banks offering mortgages with only 5% down payments

But does this mean no one should ever own a home? No, not quite, said Oswald.

Older workers often want to own their homes as they prepare for retirement, and that has little impact on employment rates.

"If we look at extremely successful countries like Germany and Switzerland, we see that people aspire to home ownership near the end of their lives," said Oswald. "That is rational and efficient. But when people are young, you want them to be mobile."

The study -- co-authored by former Bank of England monetary policy committee member David Blanchflower -- reached the same conclusions as Finnish research published earlier this year.

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