The effect of housing prices on fertility in Mexico

Abstract

This study estimates the causal effect of housing prices on fertility in Mexico using a two-stage least squares (2SLS) approach. Leveraging exogenous variation from the expansion of Real Estate Investment Trusts (REIT), and using the largest REIT’s revenues as an instrumental variable, we provide nationally representative estimates of how increases in housing prices influence birth rates. The analysis combines administrative records, labor market surveys, and financial data across states from 2011 to 2023. The results show that rising housing prices significantly reduce fertility: a one-point increase in the housing price index leads to an average decline of 6.6 births per 100,000 women of reproductive age. This negative effect is most pronounced for first births and among younger women, highlighting housing affordability as a key constraint during the initial stages of family formation. A static interpretation of the estimates suggests that price increases from 2011 to 2023 may have accounted for a 60% reduction in births. These findings highlight the demographic pressures induced by housing market dynamics and underscore the importance of integrating housing affordability into population and social policy frameworks.