Rising Housing Costs Linked to Declining Birthrates in Developed Nations

Many developed countries are experiencing a significant decline in birthrates, a trend increasingly associated with the rising costs of housing. Research by Benjamin K. Couilliard, a job market candidate from the University of Toronto, explores the complex relationship between housing expenses and fertility rates. His study utilizes data from the US Census Bureau to construct a dynamic model that factors in housing choices, including location and unit size, providing a more comprehensive understanding of the issue.

Previous studies have often relied on geographic variations that can lead to selection biases, and they have generally overlooked the impact of unit size on family planning. Couilliard’s model addresses these gaps by incorporating a nuanced approach to housing and fertility decisions. By extending methods from Petrin (2002) and Berry et al. (2004), he manages to navigate data constraints while accounting for heterogeneous residuals, thus minimizing the risk of misinterpretation.

The findings confirm predictions from the Becker quantity-quality model, which suggests that larger families tend to be more sensitive to housing costs. As a result, the increasing price of housing appears to deter couples from having more children. Couilliard’s analysis indicates that since 1990, rising housing costs have contributed to a reduction of approximately 11% in the number of children born, accounting for nearly 51% of the decline in total fertility rates observed from the 2000s to the 2010s. Additionally, there are 7 percentage points fewer young families reported in the 2010s compared to previous years.

To further investigate the causal relationship between housing costs and fertility, Couilliard varied housing costs directly within his model. This approach allowed him to isolate the impact of rising expenses on family planning decisions. The results suggest that increased housing costs since the 1990s have had a profound effect on demographic trends.

In exploring potential policy responses, Couilliard’s research indicates that increasing the supply of larger housing units could be more effective in boosting birth rates than similar investments in smaller units. Specifically, his counterfactual analysis reveals that a shift in supply toward larger family-friendly housing could generate 2.3 times more births compared to an equivalent cost adjustment for smaller units. This insight highlights the need for policymakers to consider housing strategies that are conducive to family growth.

As developed nations grapple with low fertility rates and the socioeconomic challenges that accompany them, Couilliard’s research underscores the pressing need to address housing affordability as a critical factor influencing family dynamics. By understanding the interplay between housing costs and fertility choices, stakeholders can work toward creating environments that support family formation and growth.