Burning the Australian dream: Temperature shocks and homeownership in Australia

Abstract

Rising temperature and climate change impact individual and household economic decisions. While an established body of literature has examined the effects of temperature shocks on different outcomes, there is limited evidence on the relationship between temperature shocks and homeownership. We contribute to the literature by presenting evidence on the impact of temperature shocks on homeownership in Australia. We use longitudinal data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey and satellite re-analysis temperature data over the period 2001 to 2019, and apply a fixed effect approach that addresses unobserved heterogeneity. We find that an increase in temperature shocks is associated with a decline in the probability of owning a home. We find this relationship to be more pronounced in urban than rural areas, and among individuals with a bachelor's degree. We also find the relationship to be persistent in recent years. Additionally, we find neighbourhood crime, social capital, neighbourhood satisfaction, life satisfaction and house prices to mediate the relationship between temperature shocks and homeownership.