Homeownership, housing capital gains and self-employment

This paper measures the impact of individual-level housing capital gains on transitions into and out of self-employment. Drawing on special features of the 1985–2013 American Housing Survey (AHS) panel, our most robust models control for recent expenditures on home maintenance, MSA-by-year fixed effects, lagged proxies for wealth and other household attributes. Net of home maintenance, a 20% real increase in home value over a two-year period raises the likelihood of entry into self-employment by roughly 1.5 percentage points; housing capital losses have little effect on exits. Controlling for house fixed effects, self-employed homeowners are also more likely to hold a HELOC, facilitating easy, low-cost access to home equity that could be used to cover business expenses. These and other estimates suggest that links between homeownership and self-employment are strong enough to be important when home prices are rising rapidly, but modest when housing capital gains are limited or negative.