Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a University Professor and Director of Cities at the University of Toronto’s Martin Prosperity Institute, and a Distinguished Fellow at New York University’s Schack Institute of Real Estate.
Lower birth rates in expensive cities are more likely due to how Americans self-sort by income, education, age, and other factors.
On Tuesday, I woke up to a story that was going viral on social media. The story, based on an analysis by Jeff Tucker of Zillow Research, showed a correlation between the housing prices in expensive cities like New York and Los Angeles and the change in fertility among women aged 25 to 29.
The idea that high housing prices would impact fertility comports with a certain intuition we have these days about how hard life is in expensive cities, especially for younger people. As housing prices go up, people can afford less space, so the higher price of the housing needed to accommodate kids leads people to delay having a family, to have fewer kids, or to have no kids at all.
But that’s not actually the way fertility works. There is a significant body of demographic literature which contends that it is not higher cost burdens, but actually higher levels of education and income that cause fertility rates to fall. Across the world, as people and cities and nations get richer, the birth rate declines accordingly. The trend that the Zillow report describes fits into that pattern—not the other way around.
Here’s a key chart from the study. It’s a scatter graph that purports to show the close relationship between home values and fertility. Note how the fitted line slopes sharply down from left to right. Across U.S. metros, fertility rates decline as house prices go up.
The next chart gets more granular, plotting how birth rates have fallen the most in counties that have experienced the greatest increase in home values.
The counties with the sharpest increases in home values also saw remarkably large drops in fertility, according the Zillow analysis. In these places, fertility among women in their mid-to-late 20s dropped about 13 percent between 2010 and 2016—twice as much as it fell in counties with medium home-value increases.
The Zillow analysis does recognize the limits to the connections we can draw between housing prices and fertility. Its qualifications and caveats are worth quoting at length:
The negative relationship between the two trends across counties is statistically significant, but clearly there is a great deal of variation in fertility declines unrelated to home values. Large differences from the trend reflect the fact that only 19 percent of the variation in fertility changes can be predicted by home value changes … [T]he correlation observed here is by no means proof that home value growth causes fertility declines. One alternative explanation could be the possibility that there is clustering into certain counties of people with careers that pay well enough for expensive homes but make it difficult to have children before 30.
Actually, according to Zillow’s own models, housing prices explain less than 20 percent of the variation in fertility. That’s more likely, and more in line with what we know about the connection between housing prices and birth rates.
In a detailed 2012 study, the demographer William Clark found that the real effect of expensive housing markets is to delay fertility (particularly the onset of first birth, by a few years), rather than to cause any overarching decline in fertility. A separate, 2013 study by economists Lisa Dettling, of the board of the governors of the Federal Reserve system, and Melissa Kearney, of the University of Maryland, came to a similar conclusion. Their study found that while a short-term increase of $10,000 in house prices leads to a 2.4 percent decline in births among non-homeowners, it actually leads to a 5 percent increase in fertility rates for homeowners—likely a consequence of the increased “wealth” generated by their homes. Taking the U.S. economy as a whole, Dettling and Kearney estimated that in 2012, an average increase of $10,000 per home would lead to a roughly 1 percent (0.8 percent) increase in fertility.
The late, great Nobel Prize-winning economist Gary Becker is the person who introduced the basic set of ideas about the “cost of children” in a classic paper written back in 1960, called “An Economic Analysis of Fertility.” His basic model said children could be viewed similarly to other sorts of goods in that they convey “utility”—an economist’s term for value—to their parents. As people and societies get richer, they do not just want more and more stuff; they want better stuff. So people in more affluent societies opt to have fewer children and bestow them with more advantages that come from more parental time and interaction, more books, better schools, and more extracurricular activities. Crassly put, when it comes to having kids in affluent societies, people trade quantity for quality.
Across the world, as people and cities and nations get richer, the birth rate falls. In this basic model, the richer the place, the fewer the kids, regardless of housing prices. As societies get richer, people also begin sort themselves into different kinds of places, by income, education, age, and other factors. We “vote with our feet,” in the famous words of Charles Tiebout, sorting ourselves into places that provide the bundles of services we need or want at the tax levels we want to pay.
So young people starting out in their careers and without kids head to expensive cities, where opportunities are plentiful. They don’t necessarily move out of these expensive cities when they form relationships and get married, or even when they initially have kids—that is why the streets of expensive cities are filled with parents and caretakers pushing expensive strollers.
But once those kids start going to school, their families begin to seek out places that offer better schools and more space—frequently expensive suburbs in those very same metro areas. Or as my Atlantic colleague Derek Thompson put it on Twitter:
3) It's too simple to say that housing prices drive fertility trends, the end.— Derek Thompson (@DKThomp) June 12, 2018
There are other factors: career, weather, etc. Maybe rich single ppl who don't want kids are choosing happily to stay in cities, and most US families want affordable space in warm weather, anyway.
The reality is that expensive metros attract people who are less likely to have kids, or who decide to do so later in life. Indeed, other research shows that many highly educated women are not having children in their 20s at all. It also could be that some educated households are moving out of these places when they decide to have kids. But the lower fertility rates of pricey cities are much more likely to reflect the edging out of less advantaged, less educated groups that traditionally have higher fertility rates. Fertility rates for Hispanic women aged 20 to 29 are quite a bit higher than for white women, at 154 births per 1,000 women, compared to 88.
Higher housing prices don’t result in lower birth rates in expensive cities. It’s just one more dimension of what Bill Bishop long ago dubbed “the big sort,” which defines our economic geography today.