“Stable or Stuck?” Employment and Earnings Effects of Mortgage Subsidies for Unemployed Homeowners”

Carolina Planning Spring Speaker Series: Stephanie Moulton

Abstract: Policy interventions target negative shocks to employment or housing as independent events, through extensions to unemployment benefits or mortgage subsidies to prevent foreclosures.  In this paper, we test the extent to which stabilizing an unemployed homeowner’s housing through mortgage payment subsidies leads to better long-term labor outcomes. On one hand, mortgage subsidies delay foreclosure and extend time for job search while the labor market recovers, which may lead to higher quality jobs. On the other hand, such subsidies could exacerbate lock-in for homeowners, reducing mobility and extending the duration of unemployment spells. We use data on unemployed homeowners who sought assistance through the U.S. Department of Treasury’s Hardest Hit Fund program in Ohio, which provided mortgage payment subsidies to unemployed homeowners for up to 15 to 18 months while they searched for a job. Our identification strategy exploits the fact that some who began the application process did not receive assistance for reasons exogenous to labor outcomes. Through difference-in-differences models with individual fixed effects, we find that the receipt of mortgage payment subsidies extends the duration of unemployment in the short-term, but results in significantly higher wages and a higher probability of remaining employed over the long term.

Stephanie Moulton is an associate professor in the John Glenn College of Public Affairs at The Ohio State University, a faculty affiliate of the Center for Financial Security at the University of Wisconsin, and a visiting scholar at the Philadelphia Federal Reserve Bank. Her research focuses on the design, implementation and evaluation of housing and consumer finance policies and programs, with an emphasis on vulnerable populations.  Her current research focuses on homeownership and mortgages for older adults, including reverse mortgages, and homeownership programs and foreclosure interventions administered by state housing finance agencies. She has served as principal investigator for numerous studies estimating the impact of financial interventions on household outcomes, including evaluations with the National League of Cities, the National Foundation for Credit Counseling, the Ohio Housing Finance Agency, and the U.S. Department of Housing and Urban Development. Her research has been published in top policy and housing journals, such as the Journal of Urban Economics, the Journal of Policy Analysis and Management, Real Estate Economics, Journal of Housing Economics, Housing Policy Debate, and the Journal of Real Estate Finance and Economics. Moulton was a 2014 postdoctoral honoree with the Weimer School of Advanced Studies in Real Estate and Land Economics. Moulton received her PhD from Indiana University in 2008.