Wednesday, September 01, 2010

Geographic Mobility Stimulus

Richard Florida has advocated renting instead of owning a home. Ryan Avent has suggested a migratory stimulus. I'm surprised that Avent didn't connect the dots back to the idea in a post only a few hours old:

The authors conclude, "These estimates imply that the recent housing bust could have a significant negative effect on college enrollment through the reduction in housing wealth of families with college-age children." Er, yes. Though one suspects that high unemployment and slashed state budgets could be at least as important. ...

... Housing issues aside, this suggests that lack of access to credit is reducing human capital investment among lower income households. And that's terrible! Efforts to improve access to cheap financing for college could therefore improve economic mobility while reducing income inequality—and all while boosting the educational attainment of the labour force, which should improve long-run growth prospects. As interesting as the housing equity story is, the big story here, to me, is the missed policy opportunity.

The results of the study [that Avent covers] don't indicate that renting has any effect on college enrollment. But being tied to a bad mortgage can't be a good thing for your kid's college fund. I am thinking about initiatives to plug the brain drain that offer college graduates incentives to buy a home in the state where they went to school or the original Faustian bargain to leverage the housing market bubble to fund attending university. Such policies discourage geographic mobility and hinder economic development.

Increasing geographic mobility is an investment in human capital. To the extent it might boost educational attainment would be an interesting study. Affordable home ownership for lower income families might be good for the community. It is a bad idea for the individual.

2 comments:

Andrew said...

I question the universal validity of your last statement. Affordable homeownership offers many low income families stable environments in which to raise their children, including stable schooling. Many low income renters rent month-to-month and may need to switch schools during the school year due to housing instability. Earlier this decade small cities like Lancaster, Pennsylvania had more than 100% turnover within their schools due to multiple mid-year family moves.

The last time I checked, rental-related instability far outweighs foreclosure-related related instability for lower income families in Pennsylvania.

Jim Russell said...

Andrew,

Foreclosure-related instability isn't the only concern. There is also employment-related instability or income-related instability.

Also, I'm sure that affordable homeownership isn't the only answer to the housing instability problem.