Housing Policy is Pro-Natalist Policy

YIMBYs and Pro-Natalists have a lot in common & may have the solutions to the others woes

The issue of declining fertility rates around the globe has risen in prominence in recent years. Even Elon Musk is concerned about the impacts of declining fertility on society, citing it as an existential threat to humanity. Even if declining fertility is not an existential threat at the level Musk proposes, it does present serious concerns for society. Economic stagnation, social security insolvency (an event likely to happen regardless), increased dissatisfaction with family life, strains on elder care, and much more are potential side effects of declining fertility rates. Authors like Matt Yglesias have also argued that population decline in America may pose national security threats. Immigration can serve as a useful back stop for fertility declines as immigrant families are likely to have more kids on average, but even the gap between native-born and immigrant families is beginning to narrow. 

Fertility rates, then, are an issue of utmost interest to policymakers. Despite its importance, pro-natalist policy faces two major problems: long-term thinking and cost. The former is straight forward. Much like climate change and social security insolvency, policymakers love to kick the bucket down the road. They don’t want to be blamed for high-cost or unpopular policy, and they prioritize immediate concerns that Americans are facing. On top of that, older Americans are one of the most engaged voter blocs. Fertility rates are not an immediate concern for them, so policymakers continue to prioritize funneling more money into programs that benefit older people in the here-and-now. 

The high cost of fertility policy is a trickier problem to resolve. Even countries that have prioritized pro-natalist policies have been hampered by large price tags which marginal outcomes. Singapore’s pro-natalist policies of encouraging marriage and supporting the costs of childbearing have had some positive effect, but they would only be more effective with additional financial input. Research on pro-natalist policies in Central and Eastern Europe found similar results. The policies were incredibly costly, with countries like Czechoslovakia dedicating up to 10% of their budgets to child support programs in the 1970s. More modern policies in countries such as Hungary have been similar. Its American equivalent would involve paying families $200,000 each just to have a third child, and its results have been negligible.

If Americans want to address fertility decline in a fiscally responsible manner, policymakers must learn from the mistakes of other countries and address the low-hanging fruit in our economic system. This includes readjusting the tax code and eliminating marriage penalties, expanding parental leave, and introducing programs like Senator Mitt Romney’s child tax credit plan. Policymakers should also seek less obvious pathways to pro-natalist policies, which would hinge upon creating a society and economy that make childbearing and family formation not only attainable, but also more enjoyable.

A key way to approach pro-natalist policy, then, is to reduce the biggest cost-of-living expenses for families. What is the biggest family expense? Housing and healthcare. This logical chain led me to completing my senior honors thesis on the role of higher housing costs on fertility rates. This research leveraged America’s local control over land-use restrictions to determine what increased housing costs, as a result of increased land-use restrictions, had on family formation. The results: increased housing costs, for both renters and homeowners, had a negative impact on fertility. Renters in particular bore the largest burden with every $500 increase resulting in a 0.1165 in the number of children in the household. 

Making Housing Affordable – for Renters and Homeowners

I won’t spend much time on this because the argument has been beaten to death, even by myself. The most straightforward way that America can reduce housing costs is to liberalize land-use regulations that prevent missing middle housing from being developed in high-opportunity neighborhoods. It’s straightforward and simple: a reduction in government restrictions would allow developers to produce housing units that better meet existing demand. The good news is, a lot of cities and states are beginning to adopt YIMBY policies that will make housing development easier. Minneapolis was an early adopter to abolish single-family zoning, California has banned localities from implementing restrictive zoning laws, and the mayor of New York City, Eric Adams, has (at least rhetorically) embraced YIMBYism. 

For housing and YIMBY activists, however, the fight cannot end there. Introducing pro-natalism as a YIMBY cause (which fits nicely with its “politics of yes” and pro-growth stances) requires us to imagine what it means for housing to be affordable and attainable for families. In particular, how do we promote cities that not only welcome in adult newcomers, but also families with kids of all ages? A few reforms stand out to me as solid places to begin. 

Homeownership policies that make it easier for young families to access mortgages are an important first step. While homeownership may not be desirable for everyone, the literature indicates that homeownership is often viewed as a prerequisite to child bearing. In particular, societies where homeownership is common and difficult to enter are particularly disastrous for family formation. Homeownership is one part of the mosaic of signifiers in America that you “made it”, providing you with the security needed to comfortably begin creating a family. 

YIMBYs may not all love to hear that homeownership may need to be part of the mix if you are to also embrace pro-natalism. However, the interests of YIMBYs and first-time homebuyers are not all that dissimilar. High housing costs create enormous barriers to entry for young families, and first time homebuyers would benefit immensely from lower housing costs. Increasing the supply of housing is certainly one necessary way to improve access to homeownership, but financial barriers would still remain. 

Barriers for first-time homebuyers include the hostile mortgage lending environment since the Great Recession, which could be resolved by loosening the post-recession regulations through the Consumer Financial Protection Bureau (CFPB). While the regulations were well-intentioned, and potentially necessary post-recession, in many ways they have become far too punitive. These regulations also sit atop an overly complicated 

Removing excessive regulations, such as the ability-to-pay rule (also called Appendix Q), which add unnecessary red tape for first time homebuyers from lower income backgrounds, could improve access. In particular, lenders are required to document information about borrowers that have little-to-nothing to do with their ability to pay their mortgage. The CFPB began to modify this in 2021, but the Biden Administration’s CFBP extended mandatory compliance until October 2022. At a minimum, the murkiness of these rules are likely to make lenders more cautious and the environment for first-time homebuyers more hostile and confusing. 

On top of regulations, the Federal Housing Administration (FHA) is heavily biased towards larger mortgages. The supply of small dollar loans does not match existing demand, especially for low-income households who need them the most. Additionally, those who apply for smaller loans through the FHAs assistance programs are more likely to be denied. Lenders – private and government alike – have a much smaller return on investment for small loans, disincentivizing them. The Urban Institute has recommended that lenders be more flexible with underwriting to address disparities and increase access to homeownership. 

Final Thoughts

The large price tags on more “traditional” pro-natalist policies – those that provide cash to parents and directly subsidize child rearing costs – do not appear to dramatically increase fertility. Their effects are marginal to negligible. This is unsurprising – the decision to have a child is a deeply personal one with millions of issues to consider. That should not, however, prevent policymakers from thinking creatively on how to address fertility decline. The need for a young, dynamic population is evident in economic growth, innovation, and general creativity. Instead, policymakers should reduce the cost barriers to family formation in the United States. This can start with obvious reforms of the US tax system and paid parental leave, but other cost-of-living concerns present an alternative path. Reducing cost-of-living, especially around housing, can be a powerful tool for addressing fertility decline in a manner that is fiscally responsible, beneficial to large swaths of the population (even those without children), and effective. 

While writing this post, I realized this topic is too difficult to do with justice in one post. I will be expanding on my proposals around renter-specific policies and broader reforms to urban policy that can create better conditions for family formation. Check back next week for those proposals!