Rising Housing Costs Linked to Declining Fertility Rates

Many developed nations are grappling with declining birth rates, and new research suggests that rising housing costs may be a significant factor. A dynamic model developed by Benjamin K. Couilliard, a job market candidate from the University of Toronto, explores the relationship between housing affordability and fertility rates. The study utilizes data from the US Census Bureau and addresses several gaps in existing research, specifically the effects of location and unit size on family planning.

Couilliard’s model provides an innovative approach by allowing for joint decisions regarding housing and fertility. By incorporating various choices about location and house size, the research aims to provide a more nuanced understanding of how housing costs influence family size. Traditional studies often overlooked these factors and relied on geographic variations that could lead to selection issues.

The findings reveal that rising housing costs since 1990 have contributed to a significant decline in fertility rates. Specifically, the research indicates that increased housing expenses are responsible for approximately 11% fewer children being born, accounting for 51% of the total fertility rate decline observed between the 2000s and 2010s. Furthermore, there has been a notable decrease of 7 percentage points in the number of young families during the same period.

To understand the mechanism behind this decline, the study applies ‘micro-moment’ techniques, which allow for better handling of data constraints and the inclusion of heterogeneous residuals. This analytical method helps ensure that the model is not mis-specified, thus providing more reliable results.

The research underscores the importance of housing policy in addressing declining birth rates. Policy counterfactuals indicate that shifts in the supply of larger housing units could lead to significantly higher birth rates. Specifically, the study suggests that providing larger family-oriented housing could generate 2.3 times more births compared to an equivalent cost shift for smaller units. This highlights the critical role that family-friendly housing policies can play in promoting higher fertility rates.

As countries continue to face challenges related to low birth rates, understanding the economic factors that influence family planning is essential. Couilliard’s research contributes to this understanding by linking housing affordability directly to fertility choices, presenting a compelling case for policymakers to consider housing strategies as part of broader efforts to encourage family growth.