Excess Living Space in Germany and Its Potential for Tight Housing Markets: When Children Move out from Home

I conduct an empirical analysis of household living space consumption based on microdata from the German Socio-Economic Panel. At the stage of the family life-cycle when children launch from home, frequently, no adjustment of living space takes place by the parental household, the then so-called empty nest household. In many cases, this doesn't happen due to market frictions like political interventions which lower the mobility of elderly households. I claim that a better utilization of this space would improve housing markets suffering from a lack of dwellings. Supplying this space to the market can substitute new dwelling construction and prevent related environmental harm. Thus, I quantify the total amount of excess living space in Germany related to this life-cycle effect using a multiply linear regression model to approximate the potential of living space creation by comparing empty nest households to a control group. On average, empty nest households consume 11 m2 more than the control group. Further, the application of a fixed effects model shows that if empty nest households move, they downsize significantly by about 16 m2. Moreover, I estimate environmental effects related to the substitution of housing construction. In short, my results show that there is a significant amount of vacant space in so-called empty nest households. Thus, measurements which support older households with freeing-up living space would ease tight housing markets and prevent environmental harm.