Limited Downsizing of Empty-Nesters: Elderly Housing Concentration and Fertility

The United States faces record-low fertility rates amid persistently high housing costs and a con strained housing supply. One factor may be the limited downsizing of empty-nesters and retirees, which concentrates housing among elderly cohorts and restricts access for young families during their prime childbearing years. This paper investigates the link between low fertility and the high elderly housing concentration. In the U.S. context, we document a strong association between low fertility and both high elderly housing concentration and low housing supply elasticity. To quantify the underlying mechanisms, we develop a general equilibrium overlapping generations model with endogenous fertility and housing. In the model, two channels dominate: liquidity constraints among young households, which prevent them from accessing housing large enough to comfortably raise children, and habit formation amongoldercohorts, whichdiscouragesdownsizingandfosterselderly housing concentration. We conduct counterfactual policy analysis aimed at raising fertility through a reduced elderly housing concentration. An increase in property taxation reduces elderly housing concentration, but depresses fertility and welfare. Liquidity-focused interventions are more effective: a targeted transfer to young parents simultaneously raises fertility, reduces concentration, and gener ates large welfare gains. Yet, the cohort-specific welfare decomposition shows that these gains come partly at the expense of older cohorts.