##untry data. chart 5 contains a scatterplot of losses in potential output during the crisis against rental rates and chart 6 shows the relationship between rental rates and changes in unemployment. in both these cases a clear negative relationship is readily apparent. overall, the evidence suggests that there is a link between the depth of the rental market and the severity of macroeconomic outcomes during the recent crisis. 4. the role of mortgage debt in a financial crisis there are of course also a number of social benefits from owner - occupancy which need to be kept in mind. for instance, owner - occupancy represents the purchase of an asset and, since mortgage loans are amortised in ireland, therefore leads to wealth accumulation. this can be particularly helpful in retirement, when reduced income can be offset by the lower cost of outright ownership of housing. in addition, studies have shown that homeowners are more engaged in social and political activities, have more positive assessments of their neighbourhoods, better psychological health and higher educational attainments. 8 surveys in the us show that homeowners believe their neighbourhoods are safer and better places to raise children. 9 but while the benefits of owner - occupancy are well documented, there is a much less wellknown flipside to this coin : the risks associated with financially vulnerable households taking on the financial burden of house purchase. let me now discuss this issue. in ireland the burden of the current crisis has fallen squarely on the young, many of whom bought property at the top of the market. the perception that one must get “ on the property ladder ” as soon as possible that was a particular feature of the boom years, but also a consequence of the poorly functioning rental market in ireland, has had implications for younger families. many of these are now left with unsuitable properties for their housing needs ( for example, one bedroom apartments that are not satisfactory for growing families ), and with debts that they could no longer service when salaries declined and unemployment rose during the economic downturn. moreover, negative equity and mortgage arrears may make it difficult for them to move in pursuit of new, or better paid, employment. while desirable and beneficial for many, homeownership does come together with important risks that many neglected before the onset of the crisis. a particular concern in this regard is the fact that the risk of becoming unemployed or experiencing income losses is not evenly shared across society. younger and less experienced workers, and those who work in industries

that are sensitive to the business cycle, such as the construction sector, are particularly exposed to the risk of unemployment. this is illustrated by chart 7 which shows that the crisis has disproportionately affected unemployment rates among younger age cohorts in ireland. graduate salaries have declined significantly since 2007, which has long - term implications for the earning potential of young people. 10 chart 8 shows that employment in the sectors most vulnerable to the economic cycle, such as construction, has been most adversely affected by the crisis. thus, the lack of a deep and well - functioning rental market forces all households, including those at a relatively high risk of unemployment, into the property market. while the great see rohe and lindblad ( 2013 ) for a discussion of the benefits of homeownership. see belsky ( 2013 ). conefrey and smith ( 2014 ). bis central bankers ’ speeches majority of borrowers are credit worthy and will service their loans, unemployment and income loss, which may be caused by the unemployment of a spouse or partner, have been important determinants of mortgage arrears in ireland. 11 banks in economies with very high house ownership rates may therefore experience high credit losses in a downturn. the resulting link between highly - indebted and financially more vulnerable households and the banking sector can create a cycle which is both self - reinforcing in good times with expectations of increasing capital values increasing equity and enabling greater indebtedness, and in bad times as both banks and households suffer losses. what role can rental markets play? buying a house using a mortgage is a risky leveraged investment that involves a household borrowing several times its annual income to buy an asset with an uncertain future value. such investments should only be entered into by those that understand the risks and feel able to assume them. moreover, the rental market can alleviate the risk of capital loss and negative equity, increase labour mobility and thus facilitate the adjustment following adverse economic shocks. from a financial stability perspective it is therefore important that households that worry about the risks of homeownership have the option, if they wish, to rent a property that provides the type and quality of housing, and security of tenure, that they require. let me next turn to the rental market. 5. the private rental market it is clear that in ireland, in contrast to elsewhere in europe, renting a home is not seen as a long - term option for households. indeed, results from a recent survey