Priced Out of Parenthood: Housing Costs, Household Formation, and Fertility in Spain

This paper studies whether housing costs affect fertility by delaying household formation in Spain, where fertility is low and departure from the parental home is late. Over the last two decades, young adults’ incomes have declined relative to those of adults aged 35-54, independent living has fallen, and homeownership among those living independently has declined. Households headed by young adults have also become less likely to be couples. Using a yearly municipality-level panel and a shift-share instrument that interacts national house-price movements with predetermined housing-supply constraints, we estimate the effects of local house prices. A 10 percent increase lowers birth rates by about 3 percent among women aged 20-34 and 2 percent among those aged 35-39, and marriage rates by about 5 and 11 percent, respectively. Higher house prices account for roughly half of the 2014-2022 decline in the implied total fertility rate of the typical municipality. We then evaluate a 2018 homeownership subsidy for young buyers in municipalities with fewer than 5,000 inhabitants. An event-study design exploiting the population cutoff shows that eligibility raises births by about 5 percent in 2021-2022 and reduces parental coresidence by about 2 percentage points in 2019-2021. We find no detectable price capitalization, while in-migration estimates through 2020 show no significant increase. The findings suggest that housing affordability constrains family formation in low-fertility settings.