Cheaper Mortgages Sparked Baby Boom: What It Means for Today’s Declining Birth Rates

• Increased availability of mortgages from the 1930s onwards contributed to the US baby boom, studies suggest.
• Two government-backed programs helped elevate homeownership among qualified US citizens, leading to higher marriage and birth rates.
• The current low homeownership rates may be a factor in the declining birth rates observed globally.

Facilitating affordable and accessible home purchasing is key to encouraging higher birth rates in the US.

Introduced in the 1930s, mortgages with low initial down payments significantly increased the US birth rate, leading to the phenomenon known as the baby boom, according to a February 2025 working paper by the National Bureau of Economic Research. This research could shed light on the current global decline in birth rates, linked to rising housing costs and stagnant homeownership rates among younger populations.

Lisa Dettling of the Federal Reserve Board of Governors and Melissa Schettini Kearney of the University of Maryland, the economists behind the study, discovered that two mortgage insurance programs contributed to around 3 million additional births between 1935 and 1957. This increase accounts for about 10% of the overall baby boom. The introduction of these mortgage options lowered the average age of marriage and childbirth and increased the total number of children per family.

In 1934, the Federal Housing Administration (FHA) revolutionized the mortgage market by offering 30-year fixed-rate mortgages that required much lower down payments. Ten years later, the Veterans Administration (VA) began offering home loan guarantees to returning service members, often with no down payment needed at all.

These FHA and VA-backed loans dramatically increased homeownership among white Americans of childbearing age, which soared from 20% in 1940 to 50% by 1960. Remarkably, half of this increase occurred before the end of World War II, a period marked by the ongoing impacts of the Great Depression and a shortage of new housing construction.

The study utilized newly digitized data on FHA and VA loans, birth records from the National Center for Health Statistics, Census population data, and personal income figures from the Bureau of Economic Analysis.

The analysis indicated that these mortgage programs did not significantly impact birth rates among non-white women, who were less likely to access or benefit from FHA and VA loans. Historical practices like redlining prevented Black Americans from obtaining these loans by excluding predominantly Black or minority neighborhoods from mortgage eligibility.

How Lower-Cost Mortgages Fueled the Baby Boom

Economic stability plays a crucial role in family planning. During times of high unemployment or reduced income, birth rates tend to fall. Millennials, in particular, have been affected by skyrocketing costs for healthcare and housing, in addition to a debt crisis. This generation holds less than 5% of the nation’s wealth, compared to 21% held by baby boomers at the same age.

This disparity has resulted in a gap between the number of children people desire and the number they end up having. Some European nations have attempted to boost birth rates by subsidizing childcare and offering paid family leave, though the outcomes have been varied.

Madelyn Driver, a millennial earning a six-figure income who still finds homeownership unaffordable, told BI, “If housing costs were more manageable, I’d feel much more financially secure and wealthy.”

Research by Dettling and Kearney suggests that the ease of accessing homeownership is more influential than merely lowering housing costs. The popular mortgages of the 1940s didn’t reduce overall housing expenses but made it easier to become homeowners by requiring very low down payments and extending loan terms. This allowed individuals to buy homes at younger ages, often before starting families.

Facilitating homeownership for younger individuals could be a strategy to address the declining birth rates, though the 2008 housing crisis highlighted the need for careful borrower qualification.

Kearney emphasized the effectiveness of policies that enhance access to credit or reduce down payments. “It’s not just about making housing cheaper,” she noted.

Since the mid-2000s housing bubble burst, homeownership rates among young Americans have dropped, although there has been a slight increase over the past decade. The homeownership rate for Americans under 35 has seen a further decline since late 2020.

Kearney added, “It might be less about whether parents can take a few months off work, and more about whether they have a room for their child for the next 18 years.”