Short-Term Effects of House Prices on Birth Rates

Abstract

This paper explores the effects of house prices on fertility rates using a new instrumental variable strategy, exploiting exogenous variation in house prices induced by planning restrictions. Using data from English counties, the instrumental variable estimates indicate that: A 10 per cent increase in house prices leads to a 2.8 per cent increase in births among owners and a 4.9 per cent decrease in births among renters. Once calculated at the mean home ownership rate the net effect is a 1.3 per cent fall in birth rates. In addition, I document that the positive home owners effect is primarily driven by the older cohort and the negative price effect among renters is mainly driven by those aged 20-29. A further assessment of house prices and fertility nexus reveals that these effects vary by region and demographic subgroup. Taken together, the results imply that local real estate market conditions may potentially change the age structure and population dynamics of a country, including many emerging markets and transition countries.

Keywords: house prices, birth rates, rents, home equity

JEL Classification: J13, R21, R23