Labor mobility is a key condition for a well-functioning labor market. If workers can’t move from place to place, then they can’t adequately respond to changes in the job market. Some observers have been concerned that homeownership can be a drag on a worker’s ability to respond to changes in the job market. At the same time, reduced mobility can contribute to a sticky housing market with reduced turnover and the potential for depressed prices.

A staff report from the New York Fed takes a look at how three issues facing homeowners affect the ability of homeowners to move as economic conditions change.

• Being “underwater” reduces household mobility. Negative equity reduces household mobility by 30 percent
• Property tax increases and/or increased mortgage costs reduce mobility.  The study finds that $1,000 of additional mortgage or property tax costs reduces household mobility by 10 to 16 percent.

For the complete study, see Ferreira, F., Gyourko, J., and Tracy, J. (2011) Housing busts and household mobility: An update. Staff Report No. 526, Federal Reserve Bank of New York.