Aging, Housing, and Fertility

Households born between 1945 to 1964 ("Baby Boomers’’) own a larger fraction of the housing stock at any given age than any of the generations before or after them, driven by home ownership patterns following the Great Financial Crisis and overall housing returns. In an overlapping-generations model, this does not necessarily displace younger cohorts from the housing market as they eventually inherit the housing wealth. However, baby boomers also live longer, raising the age at which younger cohorts receive the wealth. With a relatively fixed housing stock, this displaces younger cohorts from home ownership and owning housing wealth, which previous research has shown, is strongly related to household formation and fertility. As a result, baby boomer asset holdings may exacerbate demographic imbalances, with important implications for intergenerational redistribution and social security systems. We quantify these effects in an overlapping-generations life-cycle model with endogenous house prices.

Demographic change is one of the key economic and social challenges globally. We aim to show how asset holdings of one cohort can directly affect fertility of the next, exacerbating existing demographic imbalances. We focus on the effects of housing, typically the largest asset on the household balance sheet which has been linked to household formation and fertility decisions.