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High house prices are preventing a generation of people from having children, says a new report by the Adam Smith Institute.

Unaffordable housing has forced people to have smaller families and delay starting a family until later in life, threatening an entire generation of children who may never meet their grandparents.

With Brexit likely to lead to a decrease in immigration, the report argues, there is also a clear economic need to raise the birth rate in order to pay for Britain’s ageing population’s pension, healthcare and social care costs. As the country ages and immigration falls after Brexit, the government must remove barriers to population growth within Britain, or else face a demographic time bomb where taxes on working-age people spiral to pay for looking after their parents and grandparents.

Chief among these is the cost of housing, which is strongly associated with couples having fewer children than they would like and delaying having their first child until much later in life. The average age of women when they first gave birth has risen by four years since the 1970s, and looks to continue rising.

Though rising house prices increase the birth rate among existing homeowners, they keep people off the housing ladder and stuck renting, where they are less likely to have children.. With falling homeownership rates in the UK, especially for young people, this means that the net effect of rising house prices is highly negative on our national fertility rate. Between 1996 and 2014, a ten percent increase in house prices resulted in a 4.9% decrease in births among renters but just a 2.8% increase in births to homeowners – a net decrease of 1.3%. House price rises between 1996 and 2014 are estimated to have stopped approximately 157,000 children from being born, compared to if housing had not become more unaffordable.

The report warns that this trend is set to get even worse without radical action on housing supply from the government. The population over 85 years of age doubled between 1985 and 2010 and is expected to constitute almost 5% of the population by 2035. The median age rose from 35.4 to 40 between 1985 and 2014 and will rise to 42.9 years by 2039 unless action is taken.

The report’s author, Andrew Sabisky, argues this has serious cost implications for British taxpayers, with the over 85s costing the NHS three times as much as the average 65-74 year old whilst the number of working-age people for every pensioner is likely to fall from 3.2 to just 2.7 by 2037.

In the ten years between 2004 and 2014 homeownership fell from 60% to 35% among 25-34 year olds—the key childbearing demographic. In 1991 nearly two thirds of 16-25 year olds would have purchased property - that figure stands at just one in ten now.

Properties that young people do buy, the paper warns, will often be too physically small to fit a large family and the saving required pushes women towards older motherhood – in 2010 the average age of women giving birth went above 30 years of age with more than a quarter of births (26.5%) to mothers born outside of the UK. More and more young women are being forced to wait to have the children they want and, by both age and inappropriate housing, are forced to have fewer children than they want. These trends will mean that more and more grandchildren will be born after it is too late to meet their grandparents and great-grandparents.

This demographic decline is our choice, says the paper. To change course and allow people to start their families earlier the government must take radical action to allow more homes to be built. Without more homes and greater supply many babies will simply never be born.

Andrew Sabisky, Independent Researcher and author of the report, says:

“The housing crisis is a well-known immediate economic problem, but this report showcases how it is wrecking the lives of the people of this country, preventing them from having the children they want to have.

"This private tragedy will, in the long-run, entail massive knock-on costs to public finances. Housing market liberalisation is something the Government should do anyway, but this report outlines a new set of pressing reasons for it to act.”

For further comments or to arrange an interview, contact Matt Kilcoyne, Head of Communications, matt@adamsmith.org | 07584 778207.
 
The report ‘Children of When’ is available to read in full here.
 
The Adam Smith Institute is a free market, neoliberal think tank based in London. It advocates classically liberal public policies to create a richer, freer world.