Housing Leverage as a Catalyst or Constraint for Entrepreneurship: Micro-Level Evidence from the U.S. Economy
Keywords:
housing leverage, entrepreneurship, mortgage debt, home equity, loan-to-value ratio, household finance, U, S, economyAbstract
This study aimed to examine whether housing leverage functions as a catalyst or constraint for entrepreneurship by analyzing the micro-level association between housing debt, home equity, mortgage burden, and entrepreneurial participation in the U.S. economy. This quantitative explanatory study used secondary micro-level data from 18,742 working-age U.S. individuals aged 25 to 64 years. The final sample included 11,386 homeowners and 7,356 renters, of whom 2,318 were classified as entrepreneurs and 16,424 as non-entrepreneurs. Housing leverage was measured primarily through the loan-to-value ratio, while additional housing-finance indicators included home equity and mortgage payment burden. Data were analyzed using descriptive statistics, bivariate tests, logistic regression models, non-linear leverage specifications, marginal effects, and robustness checks. Logistic regression showed that higher loan-to-value ratios were significantly associated with lower odds of entrepreneurship in the fully adjusted model (OR = 0.68, p < 0.001). Home equity was positively associated with entrepreneurship (OR = 1.06, p < 0.01), whereas mortgage payment burden was negatively associated with entrepreneurship (OR = 0.59, p < 0.001). Non-linear models indicated that moderate-leverage homeowners had higher odds of entrepreneurship than mortgage-free homeowners (OR = 1.14, p = 0.036), while high-leverage homeowners (OR = 0.61, p < 0.001) and negative-equity homeowners (OR = 0.34, p < 0.001) had significantly lower odds. Marginal effects confirmed that higher leverage reduced the predicted probability of entrepreneurship by 4.1 percentage points. Housing leverage has a dual role in entrepreneurial activity. Moderate leverage may support entrepreneurship through collateral and credit-access channels, whereas excessive leverage and high mortgage burden constrain entrepreneurship by increasing household financial vulnerability and reducing risk-taking capacity.
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