The Effect of Mortgage Regulation on Entrepreneurship

56 Pages Posted: 18 Aug 2017 Last revised: 2 Mar 2022

See all articles by Stephanie Johnson

Stephanie Johnson

Rice University, Jones School of Business

Date Written: March 1, 2021

Abstract

I show that policies restricting the ratio of mortgage payments to income are particularly costly for self-employed workers. I identify these effects using local variation in exposure to the Ability-to-Repay and Qualified Mortgage rule. By limiting mortgage payment size as a share of stable, documented income, the rule disproportionately reduced credit to self-employed workers and led to a decline in self-employment and small business employment. The employment response is concentrated in new businesses and in industries where start-up costs are low enough to be financed primarily with mortgage credit.

Keywords: financial regulation, self-employment, entrepreneurship, mortgages

JEL Classification: G21, G28, L26, J23

Suggested Citation

Johnson, Stephanie, The Effect of Mortgage Regulation on Entrepreneurship (March 1, 2021). Available at SSRN: https://ssrn.com/abstract=3021306 or http://dx.doi.org/10.2139/ssrn.3021306

Stephanie Johnson (Contact Author)

Rice University, Jones School of Business ( email )

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