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well we know that high mortgage rates are impacting some important decisions in our lives right now but would these
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high rates as well as some of the problems around getting a house right now impact other decisions in our lives
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even things like getting married but believe it or not the ownership of a home and its value can be an important
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factor into the success or failure of a marriage Karen low is associate professor of business e economics and
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public policy here at the Wharton School she's done research into this and she
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joins us right now Karen great to talk to you again great to be here again Dan this is interesting I I mean you're
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talking about something I think that a lot of couples who could potentially get married wouldn't necessarily consider
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but there is a correlation between owning a home and the success or failure of a marriage yeah that's right so I
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have new research out together with Jean La foron um and it's a paper we call
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collateralized marriage because we talk about how a home and other assets act as
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collateral in the marriage contracts so while marriage might have some romantic components it's also a legal contract
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and that legal contract specifies you know what happens if the marriage doesn't work out and what we talk about
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in the paper is that for people who are able to afford a home or have other assets that contract has this extra
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strength of collateral because that collateral that home is going to be divided in case the relationship doesn't
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work out and it used to be that marriage was sort of the only contract that was available to people if they wanted to
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form a relationship and have children but that's not the case anymore since around the 90s we've had many um legal
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changes that have made non-marital fertility a possibility that still enables fathers to have rights and
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responsibilities and so that meant that people now have two substitutes that they can consider they can think about
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do I want to enter this relationship start this family in with a non-marital contract which still offers some rights
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and responsibilities or do I want the marriage contract and what we show in the paper is that for people who are
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able to afford the a home the marriage contract is stronger and better but for people who aren't those two contracts
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are going to be more similar but the dynamic we obviously have right now in terms of the housing sector is unique
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because you have mortgage rates that are up around 8% you had so many people that
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refinance mortgages a couple of years ago and kind of are are in that area uh and and then you also have the uh the
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lower level of housing that's available in general so how are those Dynamics
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potentially impacting some of those decisions right now yeah I mean based on my research you know what we use is we
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use variation in house prices at the time that people are entering into a relationship and then we look at how
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that impacts the decision to get married and then what the marriage looks like and for people who had were facing
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cheaper housing prices at the time they entered a relationship and therefore are
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more likely to own a home we find that their relationships are stronger in a couple of key ways so getting into a
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marriage involves taking certain kinds of risks it involves saying all right I'm going to put my interests to the
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side in this case and do what's right for us as a family or us as a couple but
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that's risky if the relationship could dissolve and you could be left you know
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sort of bearing the burden of those risks that you took so take for example a couple that has to decide one of us
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has a really good job opportunity in another city it's going to negatively impact the other person's career do we
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go for it if you're not married you're probably unlikely to do that because
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that's a giant risk but if you're married you would say okay we have that
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assurance that we're in this contract and if there's assets those assets are
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going to be divided if one person's career really takes off and that helps them you know accumulate a lot of assets
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those assets are going to be divided and I know it sounds unromantic to talk about it that way but that is part of
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what marriage is about it is a legal contract nobody enters into a marriage thinking it's going to end and yet that
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possibility is there we just know that the statistics mean that that possibility is there right and so
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nowadays these couples that are facing these super high mortgage rates what my research says is that because they're
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it's going to be harder for them to own a home they're more likely to maintain
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as staying as renters um that that might affect the type of relationship they choose that might cause them to be less
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likely to get married and if they do marry it might cause them to be more cautious about taking those kinds of
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risks one of those risks is somebody taking an extended period of Parental leave usually it's the mother to stay
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home with kids because think about the risk that creates to her so now she's
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putting her career care growth to the side focusing on the kids the other person usually it's the man is still
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continuing to invest in his career his salary is growing if you don't have a
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contract and he can just walk away you could be left with that lower earning potential well meanwhile he has this
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great career that he's built and that's what the marriage contract protects
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people from and but without assets without accumulating those assets like a house you have much less protection and
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a home is the main assets that people in the United States have and so these couples that are facing these very high
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mortgage rates are also facing risks to their relationship security and obviously we know that the the the
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potential of a breakup or divorce is possible with the historic uh focus on uh on divorce rates to begin with so it
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it's part of the the formula unfortunately that you go into when you're going into a marriage that you
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know it's a possibility but you maybe don't think about it on a day day-to-day
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basis that's right and so you know sometimes people ask me like do you really think people go around kind of
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maximizing these utility functions with like probability of divorce in there and
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I don't right but I do think that something happened when divorce became much easier in this country because it
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used to be very uncommon and it used to be difficult and when it became much easier and it became unilateral that one
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person could decide oh I want to walk away from the marriage I think women heard stories I think they heard stories
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from my aunt or my mom's friend got really screwed over in a divorce right because she spent her whole life staying
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home with the kids taking care of the house investing in that's still economic
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value you're creating through home production right but investing in that form of economic value that you can't
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take with you as easily if the relationship dissolves meanwhile her husband became partner at the law firm
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became a surgeon had all of this money and she got screwed over and so I think women heard those stories and they said
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I need to protect myself right and that's how I think people think about it you know it's not okay I have this
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probability I'm placing on this but it's okay I'm taking into account
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these stories that I've heard and then I'm going to be more cautious in my
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decisions and so that means if I enter a relationship where I don't have the
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security of a home I'm going to be more cautious in the Investments I'm going to
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make in my family and that ultimately ends up affecting kids because those Investments are things that are good for
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child human capital um that's a fancy word economists use to you know it's
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like it's all those time you spend doing homework with your kids on the kitchen
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table right but that's an investment that's choosing to take your time and
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instead of putting it into your own career instead of investing finishing those legal briefs or you know staying
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up late working on that spreadsheet to advance your own career you're investing
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in your child's future potential right and again those Investments are risky if
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you don't have any kind of insurance well you're talking about you what is a
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very unique and kind of it seems like multifaceted trickle down effect from this component like as you said if women
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are more hesitant or or restrained about some of these decisions then it impacts
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the decision of marriage then it impacts the decision of career and of having children which we know has a a larger
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economic impact on the country you know multiplied by millions of people as we go down the road and investing in
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children because that affects economic inequality because if people who are wealthier and able to um afford homes
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are more able to take this risk of investing in children then that's going to create a further spread between the
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have and the Have Nots and so I also connect this to um there's this really interesting book right now um by Melissa
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Kierney that's been getting a lot of attention called the two parent privilege and she talks about how much
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better off children are when they're part of a two parent married household you know rather than the sort of
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non-marital fertility setup that I talked about and I think we need to look at the economic forces that might make
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it harder for or easier for families to form that relationship and so if we know
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that owning a home is something that provides the collateral that's why our paper is called collateralized marriage
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that provides the security for that contract how do we make it easier for people who are poor to access this
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especially at a time of 8% mortgage rates so I was goingon to ask you is there in the research that you did is
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there a level or value of the home of the couple coming together that seemingly kind of ensures or at least
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leads to a greater level of security within the relationship yeah so I think what we link it back to
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is about the contract that you have access to you know and so we think people when they have access to this
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contract because when house prices were low people choose this stronger relationship with more risk more skin in
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the game right more I'm G to make these Investments and then that's okay because
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I know that later you know I'm going to be taken care of when they have access
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to these lower housing prices and more ability to do it that's what people are
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choosing to do um and so think that that has value to people and our issue is the
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policy changes in the US that have weakened the marriage contract through making divorce you know a lot easier
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making it one-sided that one person can just say I want to get divorced that didn't used to be the case it used to be
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if one person wanted to get divorced they had to compensate the other person for walking away to get that person's
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agreement right there's a lot of benefits of making divorce easier and I don't want to downplay that of course we
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can think about women in you know abusive or otherwise you know really bad marriages that need that ability to walk
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away but I don't think we've talked about the other side of it we've made
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the marriage contract weaker we've made this non-marital fertility contract stronger and now we've created this
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bifurcation where for people with assets the marriage contract still has extra teeth because the marriage contract says
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whatever assets are accumulated during the marriage no matter who paid for them those are to be divided at the time of
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divorce the non-marital fertility contract specifies child support it's specifies parental rights but it doesn't
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say anything about assets so for people with assets they still have access to this stronger contract that we call
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collateralized marriage yeah and so they're going to choose that marriage contract the issue is we've taken that
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option away for people without Assets Now there's no way for them to access this stronger contract and this stronger
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contract is what we think is also creating a better environment to invest more in children again contributing to
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this broader inequality um in a country that's already deeply unequal so you start with people have
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more assets people have less assets and now you're exacerbating this by saying
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that people with more assets can also access this stronger relationship that again as Melissa kier's book showed is
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better for children so unfortunately I don't think that the policy side is going to change anytime soon so then
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what do you think is the takeaway and the thought process that couples should really have as they move forward with
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this component as they work on their mer and they try and make them strong yeah so I think that there there are
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takeaways for couples to say if you want to be able to take these kinds of risks
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that are mutually beneficial you need to figure out how are you offering that security so if you can't afford a home
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what are the other things you're doing to ensure that you're offering that
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security to the person who's going to take those risks right so how are you structuring your relationship even
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though again nobody wants to think about divorce it's an unromantic thing to
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think about at the time you enter into a relationship but how are you setting things up so that both people are
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protected in the case of this future scenario where one person has spent their time investing more in children
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one person has spent more time investing in a career how do you make sure that both people are protected but I also
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don't think that we can give up from the policy side because there are things
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that we can do to make homeownership easier for people with lower assets right we can create programs where the
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federal government sort of backs um people with lower levels of assets or Worse credit so they can be get those
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prime mortgage rates because people with you know worse credit are facing those subprime rates that aren't even the 8%
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mortgage they're facing a higher rate right so we can the federal government
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can do things to make sure that people are able to get that insurance um that could be backed by you know a federal
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agency the federal government also could create programs to help people with down
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payments or you know to again back the mortgages that there is no down payment required and so there are things that we
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can do to make it easier for people to access that collateral and I think it's
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something that we need to think about especially in the current environment that we're in where mortgage rates are
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high in a lot of cities properties are scarce and expensive and all of this is going to be deepening inequality Karen
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great to talk with you thanks very much always great to be here Dan thank you you too as well Karen low associate
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professor of business economics and public public policy here at the Wharton School