Demographics, Human Capital, and Housing Demand

Abstract

This paper aims to investigate how demographics determine the amount and the quality of housing services demanded. It contributes to the current debate in three ways: First, based on a very detailed 2001 cross-section of English households, it finds that human capital is a key driver for housing demand. Second, it refines the existing methodology by distinguishing between life-cycle variables that are expected to change with age for each household, and cohort variables, that are determined by the household's birth-cohort and not by age. Third, its findings are relevant to other European countries that already experience population shrinkage at an unprecedented magnitude. A scenario analysis with different population pro jections shows that in case of stagnating household numbers total demand can still increase as the population grows older.