Last month, the National Bureau of Economic Research published a new working paper examining the relationship between housing expense inflation and household alcohol and tobacco purchases. The researchers used county-level changes in housing regulations to identify how exposed certain groups of renters and homeowners were to the high rates of housing price inflation during the pandemic.
They found that in counties with more stringent housing regulations and greater exposure to housing inflation, renters increased their beer consumption by approximately 15.2% relative to homeowners with lax regulations and less housing inflation when comparing 2022 to 2019. This increase is particularly noteworthy because one might expect that households facing increased housing costs would reduce spending on non-essential items like alcohol due to constrained disposable income.
Instead, the researchers suggest that these increases in beer consumption may be due to the use of alcohol as a coping mechanism for the added financial stress caused by rising housing expenses. They also observed that the increase in spending was primarily on low-cost beer, rather than on wine or liquor. This observation further supports the idea that renters might be turning to more affordable options as a way to manage their financial burdens.
To conduct this research, the authors used a difference-in-difference-in-difference approach. This method compared changes in alcohol and tobacco purchases between renters and homeowners, before and after the housing expense surge, across counties with varying levels of housing regulation. The housing regulation index was constructed using data from the Wharton Residential Land Use Regulation Index.
This approach lets the researchers compare between renters and homeowners across counties. They choose to separate renters from homeowners because renters more regularly enter into new housing contracts, and homeowners are relatively insulated from the increase in housing inflation. They still experienced inflation in the prices of other goods, but people with fixed rate mortgages before the pandemic would have experienced much lower housing cost increases.
This paper offers new insights in a few important ways. First, it looks at how high inflation after the COVID-19 pandemic has impacted people's health habits, especially alcohol and tobacco use. Second, it explores the two-way relationship between financial struggles and substance use by examining how local housing regulations affect housing costs. Finally, it sheds light on how local housing regulations impact the housing market and the financial decisions of households.
The research also highlights the importance of considering the broader public health implications of housing policies. By demonstrating a link between housing affordability, financial stress, and alcohol consumption, the study suggests that addressing housing market supply constraints could not only alleviate high housing costs but also improve household financial security and influence health-related behaviors. The negative impacts of alcohol consumption are well established, and this research underscores the need for policymakers to consider the unintended consequences of housing policies on public health.
This study shows how seemingly disparate aspects of public policy can be intertwined. Housing policy is health policy. These researchers have shown how economic pressures can influence health-related behaviors and how housing policies can be a tool to address public health concerns. This study serves as a reminder of the far-reaching effects of economic stress and the need for policies that support both affordability and well-being.