Incorporating Financial Hardship in Measuring the Mental Health Impact of Housing Stress

Abstract: Housing expenditure tends to be sticky and costly to adjust, and makes up a large proportion of household expenditure. Additionally, the loss of housing can have catastrophic consequences. These specific features of housing expenditure imply that housing stress could cause negative mental health impacts. This research investigates the effects of housing stress on mental health, contributing to the literature by nesting housing stress within a measure of financial hardship, thus improving robustness to omitted variables and creating a natural comparison group for matching. Fixed effects (FE) regressions and a difference-in-differences (DID) methodology are estimated utilising data from the Household Income and Labour Dynamics in Australia (HILDA) Survey. The results show that renters who are in housing stress have a significant decline in self-reported mental health, with those in prior financial hardship being more severely affected. In contrast, there is little to no evidence of housing stress impacting on owners with a mortgage. The results also suggest that the mental health impact of housing stress is more important than some, but not all, aspects of financial hardship.