Can new studio apartments open more homes for families?
A research review, and some new data analysis
How do we encourage more families to live in cities? Increasingly, the policy conversation has focused on high urban housing costs. Many of our cities are too expensive, pushing families to look for cheaper housing in the suburbs.
There has also been a particular focus on “family-friendly” housing. Thanks to recent survey evidence from Lyman Stone and Bobby Fijan, we know that families strongly value additional bedrooms. That’s also visible in practice, as households with children are far more likely to live in housing units with three or more bedrooms.
High housing costs are not an issue specific to families, and in the last decade the YIMBY movement has developed a fairly comprehensive toolkit for building more housing in order to lower housing costs. Readers of this blog will likely know the basics: zoning for denser housing development, removing parking minimums, streamlining housing approval processes, and so forth.
But what happens if we build new housing that doesn’t take these family-sized forms? These days, a decreasing share of new housing has three or more bedrooms, which is likely even more true in urban areas. Some YIMBY policies (though not all) will disproportionately increase development of dense apartments with low bedroom counts. Will families still benefit from these policies?
This seems to be an open question in the policy world. For example, Stone worries that higher density could cause lower fertility1 A recent Financial Times feature on the declining number of children in London voiced a similar concern, highlighting that very little new construction in the city has family-friendly bedroom counts. Vancouver, Canada essentially has inclusionary zoning for families: when apartments get built after a rezoning, 35% of the units must have 2 or more bedrooms.
As we aspire to improve families’ options for urban housing, should we view new housing of any kind as a positive? Or do we need to specifically incentivize more family-sized development? If we truly care about supporting families in our cities, should we even restrict other kinds of development?2
In this article, I review some recent economic literature on this question, which provides evidence that new development will likely ease pressure on all kinds of existing housing — even if the new housing is not family-sized. I also show new data on the meaningful numbers of childless, college-educated households living in family-sized housing. The presence of yuppies in family-friendly housing further shows that these different categories of housing are closely linked, and building new housing of any kind could help families.
A different kind of “filtering”
This question particularly strikes my interest because it closely echoes one of YIMBYism’s most classic debates: does new, expensive market-rate housing lower costs for lower-income housing? This question has been a subject of policy debate and economic research for years.
Fundamentally, this is a question about what an economist might call “market segmentation.” Because homes vary by size and quality, different kinds of homes are not perfect substitutes for each other. Thus, changes to the supply of one market segment may have more muted impacts on other segments.
Today, there is good evidence that new, expensive homes lower home prices at the metro-wide level, including for homes that are already much cheaper. But it’s understandable why some people would doubt this: low-income people are very unlikely to live in new market-rate housing. The people that do move into new-market rate housing were probably already looking for a different kind of housing than most lower-income households. So why do low-income households benefit from housing that they’re not going to live in?
Our best understanding of why this happens comes from research on migration chains (also sometimes referred to as “filtering”3). Economists have tracked the “chain of moves” that occurs when a new market-rate building opens: movers leave behind vacancies in cheaper apartments, and those vacancies are filled by other movers in even cheaper apartments, and so on. Thus, even lower-cost housing becomes cheaper when we build more expensive housing. The presence of some market segmentation does not mean that different segments of the housing market operate entirely separately from each other.
This debate maps naturally onto the question of family-sized housing. Even though households with children are unlikely to move into new studios and one-bedrooms, can they still benefit from the market-wide impacts of new development? Similarly, the answer to this question depends on how strongly these different market segments are divided.
Given the aforementioned literature on low-income vs. market-rate housing, we should have a prior that these markets can be very strongly connected. Whether across different price points, geographies, or sizes of housing, migration chains can create surprisingly tight linkages across housing market segments. Additional economic research can provide further evidence on this specific question.
What the economics literature can tell us about the linkages between studios and family-friendly housing
The most directly relevant research on this question is a working paper first shared last fall by Benjamin Couillard, a recent PhD graduate from the University of Toronto. Couillard’s paper is unique, as it focuses on the direct linkage between housing costs and fertility, and even specifically examines the difference between smaller and larger housing units. His headline finding is striking: he estimates that rising housing costs in recent decades have caused half of fertility decline in the United States.
When he models the counterfactual impact of subsidizing more housing, Couillard finds that lowering housing costs by adding any type of housing supply would increase fertility by lowering the cost of housing (though he does not specifically focus on migration chains). To be clear, he finds that fertility rises by 2.3 times as much per dollar if we specifically subsidize the supply of housing units with three or more bedrooms, relative to only increasing the supply of smaller housing units. That aligns with the fact that families strongly sort into housing with three or more bedrooms. Still, Couillard’s findings suggest that the linkages between housing market segments are strong enough that even building new one-bedroom apartments would benefit family formation and fertility.
A second recent working paper uses a newly developed high-rise in Hawaii as a case study to zoom in on the resulting migration chains. Although their sample only examines one large high-rise, the authors have particularly granular data on where the new residents previously resided. They can examine a wide range of information for both the “first round” of the migration chain — those who move directly into the new high-rise — and the “second” round of people who move into these additionally-created vacancies.
New tenants in this high rise, which has both high-end and affordable units, typically moved from housing units with more bedrooms. Although units in this new high rise had relatively few bedrooms, as the average new unit had about 1.5 bedrooms, movers tended to come from larger housing units. Thus, they are opening up new spots in more family-sized units.4 The authors note that their results “address concerns that new condos fail to produce the types of homes needed by families with children.”
One recently published paper, by economist Andreas Mense, uses German data to examine a similar question. His paper utilizes construction delays from bad weather to isolate the impact of new housing, which primarily comes via single-family homes. While Mense’s primary focus is whether expensive homes affect the prices of lower-cost homes, he also tests whether homes of different sizes all become cheaper from new construction. He finds that this is indeed the case: when more homes are built — in this case, predominantly single-family homes — housing prices fall for units with any number of rooms.
Mense’s key insight is that “substitutability is not a necessary condition for market integration across different market segments.” Even if different kinds of housing are so different that no household would view them as comparable options, their markets can be very connected.
A final, useful piece of evidence comes from a 2020 paper utilizing a unique source of data: the behavior of people searching for homes online in the Bay Area, through the website Trulia. Once again, these authors find clear evidence that market segmentation exists. Many people who are looking to buy a home only ever browse certain ZIP codes and homes of certain sizes5. They are “narrow searchers.”
However, these authors also show that segments are meaningfully interlinked. One reason for this is that housing markets also have “broad searchers” who do not have such specific priorities when searching for housing, browsing homes across different geographies and sizes. These broad searchers transmit market dynamics from one market segment to another. Thus, they represent another mechanism through which building one type of housing supply also impacts the prices of other, different kinds of housing.
While none of these papers definitively answer our question, they provide solid evidence that families will benefit from new studio apartments.
Childless yuppies and families participate in overlapping housing markets
We can build on this economic literature with additional data examining the connection between these different housing markets. If studios and family-sized housing were in separate markets, then there would be little overlap in the occupants of these different housing types. So do childless, college-educated households commonly occupy family-friendly housing in cities? In other words, are yuppies taking the families’ homes?
For this analysis, I used IPUMS microdata from the 2018-2022 American Community Survey, which allows us to disaggregate characteristics for residents across building sizes.
I categorized households into 4 different groups:
Yuppies: The head of household is 25-40 and college-educated, with no children.
Families with children: The household has at least one child present
Older DINK / empty nester: The head of household is over 40, with no children and household income above $50,000
All other households.
From the baseline figure below, it’s clear that families strongly sort into housing with more bedrooms. Likewise, yuppies and DINKs are much more likely to dwell in studios and 1-bedroom apartments. But while it’s less common for yuppies and DINKs to inhabit 3+ bedroom housing units, these different households do still overlap across different sizes of housing.
There’s more we can learn from zooming into particular geographies within cities. Here, we’ll use Chicago and New York City as case studies.6
Across different neighborhoods of Chicago, yuppies occupy very different shares of family-sized housing. Neighborhoods like Lake View and Lincoln Park, Logan Square and Avondale, and West Town (which includes Wicker Park) have the highest share of childless young professionals occupying rental units with 3 or more bedrooms. These neighborhoods are higher income, amenity-dense, and popular among young professionals. It makes sense that in these locations, competition for family-sized housing is stronger — nearly a third of 3+ bedroom housing units are occupied by yuppies.
A similar pattern emerges in New York. Yuppies occupy the largest share of 3+ bedroom units in amenity-dense, core areas, like Lower Manhattan and the “gentrification belt” of Brooklyn.
In sum, yuppies and DINKs — who are disproportionately likely to live in studios and one-bedroom apartments — become much more likely to inhabit family-sized housing in the most in-demand neighborhoods.
We should also ask if these yuppie 3-bedroom occupants are different from their peers in smaller apartments. To be sure, these renters may differ in unobserved ways, because they have chosen to live in a different kind of housing than many of their peers. However, on basic socioeconomic measures, these groups look very similar. The below statistics include yuppie renters in the same sample of 6 cities included in the previous bar chart.
The clearest difference is that yuppies living in family-sized housing have larger households and lower individual incomes, while paying less rent per person. That would be consistent with these renters opting for larger apartments in order to get a better deal on rent. You could picture these 3+ bedroom yuppie households living in a Chicago 3-flat, an older Minneapolis house, or a Brooklyn walkup.
This is further evidence that housing segments are interlinked across different categories of consumers and housing types. We can reject the strongest version of the segmentation hypothesis — that building new studios is not helpful for family-friendly housing — as this would require exclusively different types of households to live in smaller apartments versus family-sized ones.
These results can’t point directly to the migration chain mechanism, but they should increase our belief that new studio and one-bedroom apartments could draw out some of these yuppie residents, freeing up additional family-sized housing.
Conclusion
I want to make two clarifications about how this research fits into the policy space. First, as journalist Christian Britschgi pointed out in a closely related article, the YIMBY playbook also has policies that would directly increase the quantity of family-sized housing. The most prominent example is probably minimum lot size reform, which specifically enables more single-family homes to be built for lower costs in exchange for having smaller yards. Townhomes have similar promise as a denser but family-friendly housing typology — and townhomes were the biggest driver of Auckland, New Zealand’s famously successful upzoning. Similarly, single-staircase developments make it more viable for multifamily apartments to have larger layouts with more bedrooms, including courtyard apartments.
More generally, few upzonings will exclusively lead to construction of small apartments.
Second, while new studio apartments will likely lower costs for family-sized housing, families will benefit even more from directly building more of this kind of housing. Both the theory and evidence discussed here support that idea: if there is some market segmentation, adding new supply will have the strongest impact within the same segment. That’s true even when that new housing also has impacts across different segments.
Thus, policy changes that particularly expand the supply of family-sized housing would be great. We should do more to expand the supply of housing with more bedrooms. However, we should not pit this as a zero-sum game between family-friendly and family-unfriendly housing. All development is likely to improve families’ housing options.7
On the research side, we have more to learn about different kinds of market segmentation — whether between different building types, affordability levels, geographies, or rental versus for-ownership housing. What exactly do these market dynamics imply for various kinds of housing policies?
Although we still have more to learn about these dynamics, the existing evidence should help us feel confident that building any kind of new housing, even housing that’s not particularly favorable for families, can help lower housing costs for 3-bedroom units.
To be clear, in previous discussion, Stone has said that he is not opposed to more small-sized homes — only that he thinks that specifically building family-friendly homes is really important. On this we agree.
Keep in mind that an inclusionary-zoning style policy requiring large-bedroom apartments, as previously mentioned in Vancouver, is essentially a restriction on lower-bedroom development. It only works because it forces developers to make a more expensive choice than they otherwise would've.
Though we should be careful with our language here, as I have mentioned before: filtering is often used to describe two different housing market phenomena.
In Appendix C of the working paper, they specifically examine the migration chain stemming from new 1-bedroom apartments. The fact that migration chains open up relatively larger units holds specifically for studio and one-bedroom units.
The authors here use bathroom count as a proxy for building size instead of bedroom, but the idea is similar.
Since we are using American Community Survey Microdata, we use PUMAs as our local geography, which capture an area slightly larger than a single neighborhood. We face some sample size constraints — some neighborhoods just don't have a lot of yuppies in 3+ bedrooms units — so neighborhoods are left in gray if the 95% confidence interval on their yuppie 3+ bedroom share is larger than +-10%.
We should also note that families can also enjoy first-order benefits of new housing that’s predominantly large buildings with smaller units. As I documented in another recent blog post, Chicago’s downtown has seen enough housing supply expansion that everyone can benefit, including families.