Expensive housing is the reason the planet is burning, the rich are getting richer, and women are choosing to have fewer children

By Ben Winck

Falling birth rates. Widening inequality. The climate crisis. They have an unlikely common denominator in the housing market. 

Home prices have rocketed higher at record pace for three straight months. Americans' views of buying conditions are the worst since 1982. And supply remains grossly insufficient after decades of underbuilding.

The price spikes started in summer 2020 as record-low mortgage rates and new flexibility around remote working sparked a wave of pandemic moves. That quickly dragged inventory to record lows. Supply has rebounded somewhat, but it remains well below the levels needed to normalize the red-hot market.

The housing crisis isn't unique to the US, either. Markets in Canada, New Zealand, Australia, Russia, Brazil, and Turkey all saw home prices surge through the pandemic, and the global rally shows "little sign of stopping," JPMorgan economists said earlier in September.

Famous economist Larry Summers theorized almost a decade ago that developed economies were in a phase of "secular stagnation," without enough productive investments to fuel their economies. The result is an inflated housing sector, which lingers as a reminder of greater economic dysfunctions. Look under the hood of the global housing crisis, then, and you see connections to the great economic problems of the 21st century.

Equality in housing is equality everywhere

Ownership of a home allows people to profit from its rising value and tap their equity in the property when they need extra cash. Failure to purchase a home doesn't just lock Americans out of those benefits, it leaves them stuck paying landowners in monthly rent.

Those who own land — or have the means to invest in properties — win out as values climb, while those who've been renting are trapped paying higher rates and placed even further from owning a home.

Income inequality has long been characterized as the biggest driver of economic inequity, but housing is the true culprit, researchers Fabian Pfeffer and Nora Waitkus said in an August paper. The distribution of housing equity plays the biggest role in deciding where wealth is allocated, according to the researchers.

Shoring up home supply and allowing for denser construction could directly level the playing field, economists Sam Bowman and Ben Southwood wrote for the Works in Progress online magazine, with housing advocate John Myers.

"Increasing the supply of housing and commercial space, while ensuring that it benefits existing residents, could turn this zero-sum situation into one where everyone can be better off," they added.

Forming a household requires a home

Where affordable housing allows Americans to start families and grow their households, expensive housing can delay such plans. And the lack of affordable homes might already be affecting birth rates.

Women in developed countries are having fewer children than they'd like, according to the Organization of Economic Co-operation and Development. Fertility crested in 2007 before tumbling during the Great Recession and continuing its downward slope.

Although factors such as increased contraception use and climate-related fears contributed to the slide, the economy was the biggest driver by far, Insider's Hillary Hoffower reported. The lack of affordable childcare, weak wage growth, and lingering gender inequities in the workplace all dragged on women's plans to have kids. In other words, the secular stagnation forecast by Larry Summers has discouraged procreation, and it's daunting to have a child when you can't afford to house it.

All else being equal, a 10% jump in home prices powers a 1.3% drop in birth rates, according to researchers at the European Bank for Reconstruction and Development.

Fighting the climate crisis requires a new kind of housing market

Shoring up home supply doesn't just rely on more houses in undeveloped areas. Rethinking housing in dense cities can serve as a one-two punch for fighting home inflation and climate change.

Urban areas like New York City and Philadelphia account for much less carbon emissions than rural and suburban locales. Cities require shorter car trips and offer public transit alternatives.

"One of the most efficient ways for us to reduce our greenhouse gas emissions is by having people live close to where they work and having them take public transit," Jesse Arreguín, mayor of Berkeley, California, told Insider in a recent interview. Arreguín has been one of the biggest proponents for denser apartment development, particularly near transportation hubs.

The world's housing markets have a choice to make: Either tackle these interconnected crises or stagnate.