6. Lifting Obstacles to Residential Mobility

Residential mobility matters. The ease of moving residence geographically has efficiency implications, because it affects the job-matching process. Low rates of residential mobility can be an obstacle to labour adjustment, making labour markets less efficient, with adverse effects on overall economic performance (Oswald, 1996[1]; Caldera Sánchez and Andrews, 2011[2]; Blanchflower et al., 2013[3]; World Bank, 2018[4]).The ease of moving residence geographically has resilience implications. Indeed, it affects the speed of adjustment to shocks by determining the capacity of workers to move from high to low unemployment areas.

The ease of moving residence geographically also has well-being and equity implications, because it affects individual and family opportunities to climb the socio-economic ladder through various channels (Judge, 2019[5]); for instance, by facilitating access to better paying jobs in more prosperous areas, through better education and training opportunities and also to better neighbourhoods, especially for children and young people coming from disadvantaged backgrounds. Evidence from the US Moving to Opportunity (MTO) project shows that the young children from families that were randomly selected to receive housing vouchers allowing them to relocate from high to low-poverty areas later in their lives had improved rates of college attendance, higher earnings and lower incidence of single parenthood (Chetty, Hendren and Katz, 2016[6]). These findings underscore the benefits of combatting segregation and reducing spatial income and wealth sorting. They also show that benefits from mobility are strongest for children as they can kick-start towards better lifetime opportunities. Moving, however, is not always beneficial. Evictions, for instance, force people to move which is neither suitable for the affected individuals nor for the economy and society as a whole. Indeed, excessive residential mobility may have adverse implications for social stability within neighbourhoods by depreciating local social capital or for the educational performance of children if they are forced to change school too often (OECD, 2020[7]).

To complement this work, future OECD work in the area of housing and mobility will deliver new granular evidence on inter-regional mobility, on the extent to which people move in responsive to local economic shocks including unemployment shocks, and on how policies can shape such responsiveness (Causa, Abendschein, Cavalleri, 2021; Cavalleri, Luu, Causa 2021). By doing this, the work will discuss the need to implement packages of structural and place-based policies that strike the right balance between encouraging people to move towards better opportunities if they wish so, and policies that create opportunities and foster local development in places lagging behind.

Empirical analysis shows that residential mobility is closely tied to housing market conditions and policies (Box 6.1). Household surveys show that the main reasons for re-locating are related to housing preferences and needs, including the desire to change tenure status, to have a new or better dwelling, or to move to a better neighbourhood (Figure 6.1). The degree to which households relocate varies widely across OECD countries: residential mobility is highest in Australia and in the United States, where more than 40% of individuals move over five years, while it is low in Southern and Eastern European countries, where less than 10% of individuals move over five years (Figure 6.2).

While there are large differences in mobility rates across countries, homeowners are systematically less mobile than renters (Figure 6.3), implying a negative cross-country correlation between homeownership and residential mobility (Figure 6.4). Mobility differences between housing tenure status persist after taking into account a wide array of individual and household drivers of mobility such as age, education, incomes (Causa and Pichelmann, 2020[8]).

  • Mobility is the highest among tenants renting at market price and the lowest among outright owners. Social or subsidised tenants tend to be less mobile than private tenants.

  • Mobility differences by tenure status are very large in all countries: for instance on average across OECD EU countries, private renters are around 5.6 times more mobile than outright owners. In The United States, displaying among the highest mobility rate in this study, the gap across housing tenure status is also very large, as private renters are around 3 times more mobile than outright owners.

Reducing policy-driven housing transactions costs encourages residential mobility. Housing-related transfer taxes, which are non-recurrent taxes due when buying or selling a property, discourage residential mobility, especially among young households, because these levies are likely to be more binding for first-time buyer. Notary fees associated with housing transactions, which are also due in certain countries when buying or selling a property, also discourage residential mobility. As a result, shifting housing taxation from non-recurrent to recurrent taxes, such as annual taxes on immovable property, can do much to enhance residential mobility.

Indeed, policy simulations suggest that shifting housing taxation away from non-recurrent levies would increase residential mobility (Figure 6.5). Reforms to reduce housing transaction levies have been recently implemented in a few countries (Box 6.2).

Residential mobility is higher where housing supply is more responsive to changes in demand. The responsiveness of housing supply depends on geographical characteristics and also on policies, in particular on land-use regulations which influence the allocation of land and housing among different uses (see Chapter 2). For instance, restrictive regulations typically give rise to large house price differentials across regions and prevent households from moving from lower-priced areas to higher-priced areas, where jobs and training opportunities tend to be better. This situation has the potential to undermine both allocation of resources and social mobility.

Simulations indeed show that policy reforms that enhance housing supply responsiveness can do much to boost residential mobility (Figure 6.5). Such reforms have recently been implemented in a number of OECD countries. For example, in 2018 the Netherlands simplified the approval procedure and removed constraints for housing corporations which seek to rent on the private market and is progressively allowing municipalities to have more control over zoning and the planning of the private rental market. Steps in this direction were also taken by Sweden in 2016, where the government presented legislative measures to make the planning system more efficient and introduced support to municipalities based on the number of dwellings permitted.

In addition, housing supply conditions can affect the economic incentives to inter-regional migration and, consequently, the spatial allocation of workers within countries (Causa, Cavalleri and Luu, 2021[9]; Causa, Abendschein and Cavalleri, 2021[10]). A flexible housing supply enhances the responsiveness of people to both local GDP per capita and regional unemployment, thus potentially contributing to an efficient matching between workers and jobs, a reduction of local imbalances and more flexibility in case of local shocks. Reducing policy-driven barriers to a responsive housing supply, for example by reforming the governance of land-use, may also improve inclusiveness as it supports people’s access to better jobs and limit the risks that people are trapped in less-advantaged areas. In fact, in the United States, rising cross-regional divides in house prices have been found to create barriers especially to the mobility of low-skilled workers towards metropolitan areas (Causa, Cavalleri and Luu, 2021[9]; Bayoumi and Barkema, 2019[11]). Overall, the lack of opportunities for regional mobility for some socioeconomic groups can have adverse consequences in terms of growth and inclusiveness (Hsieh and Moretti, 2019[12]).

Residential mobility is lower where rental market regulations, both rent control and tenant-landlord regulation, are stricter. Tenants in rent-controlled dwellings may be reluctant to move and give up their below-market rents. Also, rent control and tenant protection measures affect disproportionately low-income households as well as low- and middle-educated ones. These social groups are the least mobile to start with, which implies that too restrictive rental market regulations may unintendedly constitute an additional barrier to the mobility of the least mobile groups. Moreover, where rents are out of line with housing market conditions, landlords are discouraged from letting their property, which reduces the size of rental markets (see Chapter 3), with potentially negative repercussions for affordability. Also, excessive protection of tenants puts vulnerable workers, such as those with non-standard contracts, including young people, at a particular disadvantage.

Policy simulations suggest that adopting more balanced regulations between landlord and tenants and reducing rent control have the potential of facilitating residential mobility (Figure 6.7). The majority of OECD countries have made landlord-tenant regulations more landlord-friendly over the last decade, in particular Austria and Finland, even though rent control has often increased at the same time, with few exceptions such as the Czech Republic, the United Kingdom and the United States, where rent control has actually been eased.

While reducing excessively rigid rental market regulations is found to encourage mobility, reforms in this area can raise trade-offs. Too stringent rental regulations can discourage new construction and maintenance by capping the price of rentals. Regulations are motivated by the legitimate goal of counteracting the asymmetric bargaining power between landlords and tenants. This is particularly salient at the current juncture where countries’ need to avoid evictions of financially distressed households.2 As a response to the COVID-19 crisis, several countries have temporarily increased the stringency of rental market regulations, most often by temporarily suspending evictions and also, less often, by reducing or postponing rent payments for disadvantaged tenants (see Box 1.6 in Chapter 1).

Residential mobility is affected by the level and design of cash and in-kind housing transfers, especially among renters and low-income groups. Both housing allowances (i.e. housing-related cash transfers) and the provision of social housing are associated with higher mobility. However, social housing tenants are less mobile than private renters (Figure 6.3), because of limited portability of entitlements, which creates lock-in effects.

Based on policy simulations, increasing social spending on housing, including cash (e.g. housing allowances) and in-kind transfers (e.g. social housing), would foster residential mobility (Figure 6.7). As developed in Chapter 2, social spending on housing, which is primarily motivated by affordability and inclusiveness concerns, has declined over time in many countries. Countries such as Belgium, Canada, Luxembourg and New Zealand have nevertheless taken steps to increase the supply or renovate their social housing stock. Provided eligibility rules are designed to avoid lock-in effects, such reforms may address housing affordability issues and at the same time make it easier to relocate for disadvantaged households.

References

[11] Bayoumi, T. and J. Barkema (2019), “Stranded! How Rising Inequality Suppressed US Migration and Hurt Those Left Behind”, Vol. 19/122.

[3] Blanchflower, D. et al. (2013), Does High Home-Ownership Impair the Labor Market?, http://www.nber.org/papers/w19079.ack.

[2] Caldera Sánchez, A. and D. Andrews (2011), “Residential Mobility and Public Policy in OECD Countries”, OECD Journal: Economic Studies, Vol. 2011, http://dx.doi.org/10.1787/19952856.

[10] Causa, O., M. Abendschein and M. Cavalleri (2021), The laws of attraction: economic drivers of inter-regional migration,housing costs and the role of policies, OECD, Economics Department Working Papers, forthcoming.

[9] Causa, O., M. Cavalleri and N. Luu (2021), Migration, housing and regional disparities: a gravity model of inter-regional migration with an application to selected OECD countries, OECD, Economics Department Working Papers, forthcoming.

[8] Causa, O. and J. Pichelmann (2020), “Should I stay or should I go? Housing and residential mobility across OECD countries”, OECD Economics Department Working Papers, No. 1626, OECD Publishing, Paris, https://dx.doi.org/10.1787/d91329c2-en.

[6] Chetty, R., N. Hendren and L. Katz (2016), The effects of exposure to better neighborhoods on children: New evidence from the moving to opportunity experiment, American Economic Association, http://dx.doi.org/10.1257/aer.20150572.

[12] Hsieh, C. and E. Moretti (2019), “Housing Constraints and Spatial Misallocation”, American Economic Journal: Macroeconomics, Vol. 11/2, pp. 1-39, http://dx.doi.org/10.1257/mac.20170388.

[5] Judge, L. (2019), BRIEFING [email protected] +44 (0)203 372 2960 @resfoundation resolutionfoundation, http://www.nuffieldfoundation.org.

[7] OECD (2020), Housing and Inclusive Growth, OECD Publishing, https://www.oecd.org/fr/social/housing-and-inclusive-growth-6ef36f4b-en.htm.

[1] Oswald, A. (1996), “A Conjecture on the Explanation for High Unemployment in the Industrialized Nations: Part 1”, University of Warwick Economic Research Paper No. 2068-2018-901.

[4] World Bank (2018), Living and Leaving: housing, mobility and welfare in the European union, World Bank.

Notes

← 1. This chapter presents new evidence on housing and residential mobility across OECD countries and on the role of housing-related and other policies in influencing mobility based on Causa and Pichelmann (2020[8]).

← 2. New OECD data in the Housing Affordable Database show that at least 3 million formal eviction procedures we initiated in 18 OECD countries for which data are available. See Affordable Housing Database - OECD.

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