Renters in social housing are less likely to move

Interregional mobility is good for the labour market

Geographical mobility is an important adjustment mechanism in response to local labour market shocks. Workers tend to move from regions with high unemployment to regions with better job opportunities. Interregional migration therefore facilitates the reallocation of production factors towards more productive uses; migration boosts aggregate employment and reduces education-job mismatches. Commuting can be a temporary alternative to relocating, but most people choose to live relatively close to their workplace. According to Statistics Netherlands (CBS), the average commuting distance in 2020 was 22 kilometres. Low residential mobility has negative economic consequences as it reduces regional labour mobility, prolongs commute times and lowers productivity.

Homeowners less mobile than renters in the private sector

The costs associated with relocation are higher for homeowners than for renters, and include costs such as transfer taxes, notarial fees and estate agent fees. These transaction costs may hamper residential mobility, leading to less labour mobility and ultimately higher unemployment. These costs are on average lower for renters moving into a new rental property. Moreover, renters can easily terminate their leases, and are thus more flexible than homeowners.

A new DNB study confirms that residential mobility is higher among renters. More specifically, renters in the private sector are 2.5 times more likely to move to than homeowners (Figure 1). The probability of moving is lower for renters in the social sector (1.4 after adjusting for individual characteristics such as income, age and level of education, see Figure 1). Intraregional migrations are excluded. Potential explanations for the limited residential mobility of renters in the social sector is that they may be unable to find another house in the social sector in a different region as a result of long waiting lists. The economic benefits of high residential mobility therefore apply mainly to the renters in the private sector and less to renters in the social sector. The finding that renters are more mobile than homeowners is in line with previous research. However, a new finding is that renters in the private sector are much more mobile than renters in the social housing sector.

Figure 1 - Mobility of renters relative to homeowners

The bar graph shows the probability of moving relative to homeowners based on a duration model that adjusted for individual characteristics.

More rental regulation could limit mobility

The findings of the study have important implications for the government’s plans to expand rent controls in the private sector, with the aim of improving housing affordability for median-income renters. However, it is not guaranteed that the targeted renters will benefit from such rent controls as they may induce waiting lists, reduce residential mobility and worsen the insider-outsider divide. This divide implies that those who manage to find a house in the social sector pay a much lower rent than those who do not.

The exact design of rent controls is not known yet. The supply and allocation of rental housing could have significant impact on residential mobility. High residential mobility is not a goal in itself, but limiting it would be undesirable. It is therefore essential to take this impact into account in the design of rent controls.