Day: 2015/11/15

Pew Research Center Discovers the Death of American Household Formation

The Pew Research Center announced that in 2014, the percentage of young women (18-34 years) living with their parents or other older relatives is at a record high level going back to 1940.

Pew Not Leaving the Nest

Oddly, Pew isn’t interested in the fact that young people in general appear to be living with family, especially since 2000. Why might that be? Perhaps widespread joblessness and low incomes for young people? Fifteen years later and this is still apparently a head-scratcher.

This topic—household formation—is important to me because it indicates the future direction of land rents. Single people rarely buy houses, so we’d expect land rents to stay flat. Flat land rents lead to flat construction, and hence, low growth.

At least, that’s my hypothesis. I discussed it earlier this year when the Congressional Budget Office assumed in its models that household formation would increase sharply because young people would suddenly find jobs and build families. Many of my Georgist peers by contrast stick with the 18-year land boom cycle, pioneered by Homer Hoyt’s One Hundred Years of Land Values in Chicago, which predicts a bust around 2026. I’m not so sure, but then again, I do see a lot of construction going on in Minneapolis. Maybe that’s regionally isolated.

The lurking comparison here is Japan: Fewer families lead to fewer children, which solidifies low expectations for future rent increases. None of this is to say that endlessly growing populations are a good thing, but if your definition of capitalism requires ransoming land rents to incumbent owners in exchange for future growth, then you might want to consider an alternative theory.

I will add two thoughts to the Pew Research Center’s findings.

One, It’s interesting that women are more likely to live with older relatives than men. Census Bureau data show that in fact men are more likely to live with their parents than women, so it appears many women don’t live with their parents but do live with other relatives.

Compare this with the above chart:

Census Living With Parents

Two, excluded from both these charts are college students. I’d really like to see what that looks like. A smaller proportion of young Americans were living on college campuses in 1940 than now, and college students would probably live with their parents if it weren’t for school. Consequently, the percentage of young Americans who are effectively dependent on their parents is probably higher than in past decades.

Given that, as the Pew Center finds, marriage rates have fallen, especially since 2000, these are not trends that bode well for the future happiness of young Americans.