What is the home to the entrepreneur? For many entrepreneurs, a home is more than where the heart is. It's where they operate their business or they at least have a home office. And for many the home is also a source of financial leverage as collateral on a loan or through something like a home equity line of credit.
I just ran across a recent Federal Reserve event I wish I had seen before it happened because it would have been nice to raise the importance of housing to entrepreneurship and need for better data: Understanding the Housing and Mortgage Markets: What Data Do We Have? What Data Do We Need? I haven't been able to locate any additional papers or documentation from the event yet but just the list of people looking at housing data issues is helpful. But this does cause us to pause and take stock of what data we are available of on entrepreneurs and how they utilize their homes?
From the National Federation of Independent Businesses (NFIB), we have a whole survey on the topic of Business Activity in the Home. A couple of highlights:
- About one in four (22%) employing businesses is principally located in the home or an associated structure and another 25 percent have a home office in their residence.
- Home-based businesses overwhelmingly employ fewer than 10 people. The principal location for 27 percent of businesses employing fewer than 10 is the home compared to 4 percent for those employing 20 or more.
Also from NFIB, which looks as small business owners, under 250 employees, we have some interesting leads on ownership of personal residence as well as mortgages taken out to promote business activities:
- Small business owners are heavily invested in real estate. Ninety-six (96) percent own their personal residence, 49 percent own all or part of the building and/or land on which their business sits (excluding the one-quarter who operate primarily from the home), and 41 percent own investment real estate, excluding their residence and business.
- Real estate, particularly home mortgages, is frequently used to finance or collateralize other business assets. Seventy-six (76) percent have at least one mortgage on the real estate they own with 13 percent having three or more mortgages, 22 percent having taken out at least one mortgage to finance business activities. Sixteen (16) percent use real estate to collateralize other business assets, including 10 percent who use their homes as collateral. About one in 10 (9%) own at least one currently upside-down property. The financial leverage homes provide businesses in a weak economy with declining real estate values is a matter of concern.
We know from the Kauffman Firm Survey, which examines new businesses in the United States, that "Nearly half of businesses started in the business
owner’s home or garage. Slightly more than 40 percent operated in rented or leased space, while the remainder operated at the site of a current client, or in a building or location bought by the business."
The Census Bureau's Survey of Business Owners gives us other insights, which seem to reinforce NFIB's survey, including that twenty-two percent of employer firms are home-based and fifty-eight percent of non-employer firms are home-based. They also have many industry breakdowns and other breakdowns by veteran or other demographic statuses.
Are you aware of other data on housing and entrepreneurship? Let us know. I am aware of at least two or three in-prcess research projects which are trying to statistically equate housing market changes with changes in entrepreneurship but to the extent I am aware of what the researchers plan, all of these projects are not using microdata.