Record Low Birth Rates Suppress Housing Demand
According to the latest provisional birth report from the Center for Disease Control and Prevention (CDC), the US birth rate fell to its lowest level in 32 years with only 3,788,235 births recorded in 2018. This is 2% down from 2017 and the fourth consecutive annual decline. Birth rates declined for all age groups of women under 35 and only rose slightly for women in their late 30s and early 40s.
Declining birth rates mean lower demand for rental housing two decades from now when those born in recent years will be entering the rental market. The effects will spread to the single-family market in the following years and will persist for years to come.
The effects of declining birth rates on housing demand are not limited to the distant future. As fewer and fewer females get married and have children before they turn 35, the socio-demographic incentives to start their own household are weakening. This, in turn, suppresses housing demand for both for-sale and for-rent single-family housing, the preferred choices of families with children under 18 years.
Instead, a record number of young adults now live with their parents, relatives or share housing with roommates. As a result, headship rates (which are shares of people who are household heads) fell to record low levels in 2017, and the deterioration in headship rates was most pronounced among young adults. Young adults remain accountable for the largest number of households that had never formed, suppressing housing demand for both for-sale and rental units but fueling the rise of accessory dwelling units. In addition to birth rates, the CDC also estimates the total fertility rate – the number of births that a hypothetical group of 1,000 women would have over their lifetimes, based on the age-specific birth rate in a given year. The total fertility rate of 2,100 births per 1,000 is a replacement rate – the level at which a given generation can replace itself. The US total fertility rate has been consistently below replacement for the last decade and set a new record low in 2018. It now stands at 1,728 births per 1,000 women, 2% down since 2017.
The earlier report from CDC revealed that in 2017 there were only two states in the nation that have total fertility rates above replacement – Utah and South Dakota. DC had the lowest fertility rate, followed by all six states in New England and Oregon. In general, the geographic pattern is familiar and similar to how headship rates vary across states. The coastal states register lower total fertility and headship rates and central states show higher rates. States where current generation cannot replace itself would have to rely on foreign and domestic immigration to insure population replacement and growth.
While declining birth and fertility rates may partially reflect a cultural shift towards later marriage and fewer children, worsening housing affordability and rising child care cost undoubtedly contribute to the trend. Solving housing affordability issues would not only help halt declines in fertility and birth rates but would also boost population growth by attracting migrants from out of state and foreign-born immigrants.