In this respect two robust empirical results should be noted. _First_ , there is an apparent correlation between building and tenure structures (Figure 2).<sup>13</sup> This suggests that there could be a supplyinduced inertia when attempting to increase the share of owner-occupied units in jurisdictions with large M-F stock that was designed and produced for rental. This issue is a central point in the discussion below regarding transition countries. _Second_ , as Chiuri and Jappelli (2000) have shown, homeownership rates at retirement age are far less variable across (European) countries than rates at the age of 20 or 30.<sup>14</sup> This indicates the paramount importance of low-cost, low-risk access to housing services during the third stage of the life cycle, as well as the pivotal function of real estate ownership in diversifying retirement asset portfolios. And vice versa, there is less of a need for tenure security and portfolio diversification in the earlier stages of the life cycle (Figure 3).

# **Tenure Pattern and Economic Efficiency**

One may also consider a reverse causality: Will the existence of a rental sector in equilibrium facilitate economic efficiency? Two candidate factors are of particular interest for higher efficiency: (i) labor market; and (ii) land / housing market.

The popular notion that homeowners are less likely to move than tenants is well grounded in the literature pointing out the virtues of this to community stability, social attitudes etc. The degree to which higher homeownership contributes to labor market imbalances is somewhat less studied and clear. It should decrease or increase with the amount of compensating subsidies; for example, through regional policies (investment support, infrastructure projects). However, a stand-alone impact of high ownership rates, particularly by young households, is quite plausible.

And vice versa, economies with small rental sectors are expected to face increased migration costs and thereby a reduced elasticity of the labor supply relative to spatial wage differences. The reason is that migrants, at least initially, face job tenure and income insecurities and thus seek to reduce housing search and transaction costs, which are lower in the rental sector. Analysis for the United States shows that because of these factors two-thirds of migrating homeowners become tenants first (Joint Center for Housing Studies 2003).

A recent report on rental housing by the United Nations Human Settlements Programme (UNHabitat) (2003) makes the point that there may be an inverse relationship between unemployment and homeownership.<sup>15</sup> This supports our contention that high levels of homeownership reduce residential and hence labor mobility, which is better served by rental housing - especially in transition countries. The role of the housing market in labor mobility is to

> 13  The two outliers, The Netherlands and Spain, can be partly explained by policy peculiarities. The Netherlands has traditionally emphasized social rental, which includes detached housing. The Spanish rental sector, on the other extreme, has been depressed by decades of rent control. Eastaway and Varo (2002) discuss the Spanish case.

> 14  In their survey of 13 countries, ownership rates at ages 50–59 vary 53 - 82% while at ages 30–39 they vary 33 - 70% and at ages 25–29 they vary 11 - 59%.

> 15  The cited study estimated that a 10 percentage point increase in homeownership could be equated with an extra 2.2 percentage points of unemployment.

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