I haven't read the paper, but I'm from Spain and I've seen several things that support the hypothesis. 1) Home ownership ties you to a geographical location. I

I haven't read the paper, but I'm from Spain and I've seen several things that support the hypothesis. 1) Home ownership ties you to a geographical location. If you're renting you have more freedom to move, and increased mobility leads to less unemployment. This is the most obvious reason, but not the only one. 2) If mortgages take away a big enough portion of the paycheck, consumers have on average less money to spend in another things, and lack of demand can cripple the economy, while banks leech all the money ("extractive elites"). If rent was more prevalent, it would be easier to move to a more affordable house from time to time, driving down home prices (it would be kind of a "less captive" market; I'm not sure if that makes as much sense as I think). 3) The prevalence of mortgages gives employers a lot of leverage. If you're in serious debt, you're more likely to accept worse condition on your current job, because you can't afford to miss a payment (miss enough payments and you lose your house but keep your debt). Maybe it's a cultural thing, but this is a very real thing here in Spain. The effect is that employers can force worse conditions (especially lower salaries) on employees, which, again, creates a lack of demand because people don't have money to spend. Even worse, once you hit certain level of unemployment (which nevertheless was very high in Spain to begin with), it affects you even if you don't have a mortgage, because there is a huge amount of people willing to work for peanuts, driving salaries down for everyone and creating a feedback that reinforces the whole process.