No pension and no house? The effect of LTV limits on the housing wealth accumulation of self-employed

Investing in housing could be an attractive alternative to privately saving for a pension, definitely so for those who are not obliged to save for an occupational pension, the self-employed for instance. But access to the housing market requires a down payment. Macroprudential measures, such as loan to value (LTV) norms could hamper access to the housing market for young buyers and require additional saving for this purpose. We study the effect of the introduction and sharpening of the LTV limit in The Netherlands on the probability of self-employed and wage employed to become homeowners. We construct a treatment and control group using parental wealth as a proxy for being liquidity constrained. We show that during the period in which the LTV limit was introduced, self-employed were 47% less likely to purchase their first home, relative to wage employed and relative to periods without LTV being limited. However we show that this was not caused by lowering the LTV limit, but by contemporaneous cofounding factors. Sharpening the LTV limit has not reduced the probability to become home owners for self-employed. We also show some evidence suggesting that their status put self-employed workers at a disadvantage when the policy was enacted, possibly inducing dynamic selection out of self-employment.