Demographics, Human Capital, and the Demand for Housing

This paper aims to investigate how demographics determine the amount and the quality of housing services demanded, based on a very detailed 2001 cross-section of English households. 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. The paper’s key results are that housing demand is mainly driven by human capital and that is does not decline with age. A scenario analysis with different population projections shows that in case of stagnating household numbers total demand can still increase as the population grows older. These findings are relevant to other European countries that already experience population shrinkage at an unprecedented magnitude.