The Connection Between Mortgages, Homeownership, and the Baby Boom

Historical Context: How Mortgages Spurred the Baby Boom

The mid-20th-century baby boom in the United States can be traced, at least in part, to the advent of more accessible mortgages in the 1930s. Researchers have uncovered a direct link between the introduction of federal mortgage insurance programs and the sharp increase in birth rates during this period. Two key programs—the Federal Housing Administration (FHA) loan insurance program introduced in 1934 and the Veteran’s Administration (VA) home loans launched in the 1940s—played a pivotal role in making homeownership more attainable for millions of Americans. These programs offered low-down-payment, long-term mortgages, which made it easier for young couples to purchase homes. This, in turn, led to earlier marriages, younger first-time parents, and larger families, contributing significantly to the baby boom that defined the post-World War II era.

The FHA and VA programs were groundbreaking in their time. The FHA offered 30-year fixed-rate mortgages with down payments as low as 10%, a significant departure from the much higher down payments required before the program. The VA took this a step further by offering home loans with no down payment required for returning servicemembers. These initiatives not only boosted homeownership rates but also had a profound impact on family formation and birth rates. Between 1935 and 1957, the researchers estimate that these mortgage programs accounted for approximately 3 million additional births, which is roughly 10% of the baby boom’s total increase in births.

The Impact of Homeownership on Birth Rates

The researchers, Lisa Dettling of the Federal Reserve Board of Governors and Melissa Schettini Kearney of the University of Maryland, analyzed a wealth of data, including newly digitized FHA and VA loan records, birth count data, population statistics, and income figures. Their findings suggest that easier access to homeownership directly influenced family planning decisions. Couples who could afford homes at a younger age were more likely to start families sooner and have more children overall. The researchers found that these mortgages effectively lowered the age of first marriage and increased the total number of children per family.

The impact of these programs was particularly pronounced among white Americans of childbearing age. Homeownership rates among this demographic surged from 20% in 1940 to 50% by 1960. Notably, half of this increase occurred even before the end of World War II, a time when many Americans were still recovering from the Great Depression. However, the benefits of these programs were not universally shared. Black Americans, who were often "redlined" and excluded from accessing these mortgages, saw no discernible increase in birth rates during this period. This disparity underscores the historical inequities in housing policy and access to credit.

How Affordable Mortgages Influenced Family Planning

The connection between housing affordability and family planning is deeper than one might initially think. Financial stability is a critical factor in the decision to have children. When economic conditions deteriorate—such as during periods of high unemployment or falling incomes—people tend to delay or forgo having children. This pattern is evident in the current era of skyrocketing housing costs, student debt, and economic uncertainty, which have contributed to declining birth rates in many countries, including the United States.

Millennials, in particular, have been hard-hit by rising costs of living, including housing and healthcare, as well as the burden of student debt. Unlike previous generations, millennials control a much smaller share of the nation’s wealth, which limits their financial security and readiness to start families. This financial strain has created a gap between the number of children people say they want and the number they actually have. While some European countries have attempted to boost birth rates through policies like subsidized childcare and paid family leave, these efforts have yielded mixed results.

The Role of Housing Costs in Modern Birth Rates

While the mid-20th-century mortgage programs did not reduce overall housing costs, they made homeownership more accessible by lowering down payments and extending loan terms. This enabled young couples to purchase homes earlier in life, often before starting a family. The researchers suggest that similar policy interventions today could help address the current decline in birth rates. Making homeownership more accessible, particularly for younger generations, could provide the financial security that many feel is necessary to start or expand a family.

However, the lessons of the 2008 housing crisis serve as a cautionary tale. While easier access to credit can stimulate economic activity and family formation, it is crucial to ensure that borrowers are financially prepared for the long-term commitments of homeownership. Striking the right balance between accessibility and responsibility is key to avoiding future crises.

A Modern Parallel: Declining Birth Rates and Housing Challenges

The decline in birth rates in many parts of the world today may be partially explained by the challenges of attaining homeownership, particularly for younger generations. In the United States, homeownership rates for people under 35 have fallen in recent years, continuing a trend that began after the mid-2000s housing bubble burst. While rates have ticked up slightly over the past decade, they remain relatively low compared to previous generations. This decline in homeownership, coupled with rising housing costs, may be a contributing factor to the falling birth rates observed in many countries.

Melissa Schettini Kearney, one of the researchers, suggests that the ease of starting a family may have as much to do with access to suitable living space as it does with other factors like parental leave policies. "Maybe how easy it is to have kids is less about can they take three months off work versus ‘do I have a bedroom to put this kid in for the next 18 years?’" she remarked. This perspective highlights the often-overlooked role of housing in family planning and the potential impact of policies that make homeownership more accessible.

The Way Forward: Policy Lessons from History

The findings of Dettling and Kearney offer valuable insights for policymakers seeking to address declining birth rates. While many countries have focused on initiatives like paid family leave and childcare subsidies, the historical evidence suggests that policies aimed at making homeownership more accessible could also play a significant role. For instance, programs that reduce down payment requirements or provide low-cost mortgage insurance could help younger generations achieve the financial stability needed to start families.

At the same time, the researchers caution against repeating the mistakes of the past. The FHA and VA programs of the mid-20th century were instrumental in boosting homeownership and birth rates, but they also perpetuated racial and economic inequalities. Ensuring that modern policies are inclusive and equitable will be essential to their success.

In conclusion, the connection between mortgages, homeownership, and birth rates is more than just a historical curiosity. It offers a roadmap for addressing the challenges of declining birth rates in the modern era. By learning from the past and adapting these lessons to the realities of today, policymakers can create a more supportive environment for families to thrive.