A bombshell study has identified rising housing costs as the the primary driver of falling fertility rates in the United States, underscoring the widespread impact of the housing crisis on the nation’s changing demographics.
Rising housing costs were responsible for 51% of the total U.S. fertility rate decline between the 2000s and 2010s, according to the new preprint research paper by Benjamin K. Couillard, a doctoral candidate in economics at the University of Toronto.
Couillard’s study found that if housing costs had remained flat after 1990, there would have been 13 million more children born in the U.S. by 2020. The country’s total fertility rate in the 2010s would have been 77% closer to the replacement rate if those costs hadn’t increased, the research showed.
Advertisement
Advertisement
“That’s a surprising result,” says Couillard. “It suggests that housing costs are a major driver of fertility decline. Housing abundance is not just about affordability; it’s about long-term demographic sustainability.”
Realtor.com® senior economist Jake Krimmel reviewed Couillard’s study and calls it “one of those rare findings that’s intuitive, important, and has actionable implications for policy.
“While it’s not surprising that high rents and housing costs curb fertility, it’s very difficult to ‘prove’ it in the data,” says Krimmel. “Not only that, but the causal link needs to be quantified, so we know exactly how important the housing cost channel is relative to, say, the rising cost of child care or other economic and demographic shifts.”
Couillard’s study focuses on rents, which are highly correlated with home prices and mortgage payments, using U.S. Census Bureau data to track apartment rents at the census tract level.
Advertisement
Advertisement
Separate data from the U.S. Bureau of Labor Statistics shows that rents rose 149% nationally from January 1990 to January 2020, outpacing the overall cumulative inflation rate of 103% over the same 30 years.
Meanwhile, fertility rates have plunged. Total fertility rate, or the average number of children born to each woman, was approximately 2.08 in 1990, but down to 1.64 in 2020. Last year, it hit a record low of 1.599, according to CDC data.
A fertility rate of at least 2.1 is considered the replacement rate, or the rate at which each generation has enough children to maintain a steady population in the future.
National fertility rates are not only the concern of families and prospective parents, but they also have major implications for the economy. If the working population shrinks, government revenues may decline, threatening programs like Medicare and Social Security, which depend on a larger base of taxpayers than recipients.
Advertisement
Advertisement
Although fertility rates normally dip during recessions and then rebound as the economy recovers, the 2008 Global Financial Crisis marked a break from that trend. Fertility rates plunged in 2008 and have never recovered, even as the sizable millennial generation entered its prime years to form a family.
Next year, 2026, will mark the first year that the smaller cohort born in 2008 hits adulthood, initiating a long-term trend that will see fewer children turn 18 each year for several decades.
While many cultural and economic factors likely play a role in the declining fertility rates seen in the U.S. and many other advanced economies, Couillard’s study is groundbreaking in pinpointing housing costs as a primary driver of the trend.
“Housing and fertility are jointly determined because large and small families sort into different locations based on the number of children they have—or want to have—and housing costs,” he says.
Couillard’s analysis rests on a statistical model that separates costs and fertility decisions from other factors driving housing choices, accounting for the differing trade-offs that large and small families make when choosing where to live.
Advertisement
Advertisement
“It’s actually more accurate to call it a living arrangement model, where fertility is a key component,” he says. People “can choose to start a family or remain with their parents, and the model captures dynamic considerations like life-cycle timing and long-term housing needs.”
The new research also raises questions about reliance on immigration to make up for population shortfalls from declining fertility rates, a solution that has been advanced by many over the years.
Although not addressed in Couillard’s analysis, other research has suggested that immigration does contribute to higher rents, with a 1% increase in immigration in a city associated with a 1% increase in rents.
If that were true, Couillard’s new work suggests that increasing net immigration may lower overall fertility rates by raising housing costs, although that is not a conclusion directly reached in his study.
Advertisement
Advertisement
Couillard’s conclusions instead focus on the need to focus subsidies and other policy-based interventions on larger units, to expand the supply and lower the cost of homes large enough for families.
“If we can get housing costs down, that’s good for affordability, but it also helps us avoid the demographic problems that come with aging populations and declining birth rates,” Couillard says. “A maximalist housing policy, one that aggressively expanded supply to prevent costs from rising, could have solved the majority of the fertility problem.”
Krimmel concurs, saying the new study underscores the urgent need to “build more housing, particularly larger housing units and apartments that can accommodate growing young families.
“To boost fertility, we not only need a larger housing stock, but a different housing stock,” he says.