Housing assets and small business investment : exploring links for theory and policy

Abstract

Housing market activity and firm formation are both positively correlated with the business cycle, and the levels of mortgage lending to business owners and funding of small firms have fallen in the UK since 2008. This paper explores a neglected, causal linkage between housing assets and small business investment and the economy and, in particular, draws attention to the recent reduction in small business investment consequent to a reduced capacity of entrepreneurs to withdraw or leverage housing equity. It draws on secondary data for the UK and interviews with key policy and practice stakeholders for both housing and enterprise.