Did the Modern Mortgage Set the Stage for the U.S. Baby Boom?

This paper proposes that the adoption of the modern U.S. mortgage (i.e., low down payment, long-term, and fixed-rate)—led by the Federal Housing Administration (FHA) and Veteran’s Administration (VA) loan insurance programs—set the stage for the mid-twentieth century U.S. baby boom by dramatically raising rates of home ownership for young families. Using newly digitized data on FHA- and VA- backed loan issuance and births by state-year, and a novel instrumental variables strategy that isolates supply-side variation in loan issuance, we find that the FHA and VA mortgage insurance programs led to 3 million additional births from 1935-1957, roughly 10 percent of the excess births in the baby boom. Aggregate effects mask differences by group—we find no effects of FHA/VA lending on births for Nonwhite women, consistent with well-documented racial discrimination in these lending programs. Our results highlight the importance of access to home ownership for fertility decisions.