Do public housing tenants fare worse in the Labor Market?

Abstract

Urban housing development is one of the most important issues in economic development. The migration of population from rural areas to urban centers is an inevitable consequence of industrialization, putting pressure on housing. How society chooses to supply housing to meet the needs of urban dwellers (both existing residents and new migrants) has enormous long-term consequences that impact every facet of economic, social and political life. Hong Kong’s primary response has been the development of a public housing program over the past decades. Today, almost half of the population of Hong Kong live in publicly provided housing, making the program one of the largest in the world. However, because of rigidity in program requirements, Hong Kong public housing residents are likely to stay in the same unit permanently -- even when moving out at some point makes better sense, for example, to capture more favorable labour market opportunities in another district. Public housing residents are therefore far less mobile than private renters. This study tries to identify and quantify the impact of public housing tenancy on labor force participation and unemployment. Using long data series from both census and General Household Survey over the past decades, we found that male heads of households who are public renters indeed show higher unemployment and lower labor force participation than their counterparts in private households, even when the comparison is restricted to those for whom housing status is relatively exogenous. This shows that even in “the best city in the world for commuters,” geographic immobility can have significant negative impact on labor market performance.