When Secure Jobs Discourage Homeownership: ECB Study on Labor Shifts and Mortgages

In a new working paper released by the European Central Bank in collaboration with the Technical University of Denmark, the IMT School for Advanced Studies Lucca, and the University of Helsinki, researchers Michele Cantarella and Ilja Kristian Kavonius uncover a counterintuitive reality at the intersection of jobs and housing. Their study asks a simple but far-reaching question: how do structural shifts in labor markets shape families’ decisions to buy homes with mortgages? The answer is striking. When both personal job prospects and economy-wide occupational growth look promising, households are paradoxically less inclined to commit to mortgages. This finding disrupts the familiar belief that better jobs inevitably lead to higher rates of homeownership.

Job Security Meets Labor Market Polarization

The analysis comes in the context of Europe’s sweeping labor market transformation. Over recent decades, routine, middle-skill jobs have been squeezed out by automation and globalization, while both high-skill and low-skill occupations have expanded. This polarization has reshaped incomes and widened wealth inequality, with housing markets playing a central role. Drawing on more than 1.6 million observations from the European Union Labour Force Survey and the EU Statistics on Income and Living Conditions, the researchers connect occupational growth patterns with household traits such as job permanence, length of tenure, and income expectations. The goal is to see how the alignment, or misalignment, between personal stability and wider occupational trends influences the life-altering choice of homeownership.

The results challenge intuition. Permanent contracts and long job tenure increase the likelihood of taking a mortgage, as do positive income changes. A permanent contract raises the probability of mortgage ownership by roughly 2.7 percent, while past and expected income gains boost it by 1.5 and 2.3 percent. Yet, when an occupation is expanding across the economy, these positive effects evaporate or even reverse. For workers in growing fields, the boost from a permanent contract actually shrinks by 3.5 percent, and expectations of future income growth cut mortgage-taking by 4 percent. It is a paradox in which the most secure and promising households choose not to settle down.

The Option Value of Mobility

What explains this unexpected pattern? The study points to the concept of opportunity costs. Thriving occupations bring more promotions, pay raises, and job offers, often requiring geographic mobility. A mortgage, tied to an illiquid asset and high relocation costs, reduces flexibility. As a result, secure households in expanding sectors hesitate to anchor themselves to a fixed dwelling. Conversely, when an occupation is stagnating or declining, the prospect of relocating diminishes. Workers in stable positions may then prefer to lock in housing costs, making mortgages more attractive precisely when the larger outlook for their profession looks bleaker. In this sense, job security interacts with broader labor dynamics in surprising ways, redefining the incentives around homeownership.

Digging into the Data and Methods

Cantarella and Kavonius rely on a shift-share instrumental variable strategy to isolate causal effects. This approach builds on the idea that technological shocks to industries are largely exogenous but filter differently across occupations. By linking industry growth patterns with occupational shares, the authors generate a credible measure of occupational shifts independent of household mortgage demand. To ensure their results are not distorted by rising housing costs or local shocks, they run extensive robustness checks: controlling for equalized housing expenses, applying leave-one-out methods to purge regional effects, and even substituting overtime hours as a proxy for labor demand. The findings hold firm.

Another nuance emerges when comparing short-term versus longer-term changes. While one-year occupational shifts produce weaker and more volatile results, five-year shifts consistently show the dampening effect of growth on mortgage-taking. This suggests that households regard long-term labor trends as more meaningful to their life choices, while temporary fluctuations are discounted. A five-year horizon reflects structural change rather than noise, and it is within this longer window that the reluctance of secure households in booming fields becomes most visible.

Policy Lessons for Housing and Labor Markets

The conclusions carry weighty policy implications. They highlight a fundamental tension between labor market dynamism and the stability embedded in mortgage contracts. Expanding occupations, which might be expected to generate strong housing demand, instead see secure households postponing homeownership. When growth slows or stagnates, however, job security becomes a foundation for mortgage-taking, reducing pressure on rental markets. This dynamic suggests that labor flexibility measures could play a counter-cyclical role in housing policy, supporting ownership precisely in downturns while tempering it in periods of expansion.

For policymakers, the message is clear: labor and housing cannot be treated as separate policy arenas. Mortgage markets react not only to individual household finances but also to broader occupational shifts. Understanding the interplay between micro-level security and macro-level growth is essential to avoid unintended consequences. The research warns against assuming that improved job prospects will automatically translate into higher mortgage demand. Instead, economically secure households may resist the lure of homeownership to keep their options open in fluid labor markets.

Ultimately, the paper reframes a well-worn narrative. Secure jobs do not always lead to more mortgages. Sometimes, stability at the personal level combined with dynamism at the occupational level does just the opposite. By revealing this complexity, Cantarella and Kavonius advance debates on inequality, mobility, and financial stability while offering policymakers new lenses through which to design interventions. At its heart, the study underscores a simple truth: the decision to buy a home is never just about money; it is about the future paths that workers believe their careers might take.