Introduction

Since at least 1940, there was a remarkable increase in the size of homes and a significant improvement in the overall availability of housing worldwide. For instance, the average floor space per person in Germany more than doubled from 18.4 m\(^2\) in 1956 to 47.5 m\(^2\) in 2023. Improved income levels welfare enabled construction of larger homes. The baby boom of the 1950s and 1960s also apparently contributed to this process, as larger families required more spacious dwellings.

However, a turning point emerged in the early 2000s, marking the beginning of the reversal of this trend. This transformation is not a phenomenon that occurred in just one country. Similar developments were observed in various European countries, as well as in Japan and the United States. In light of these developments, I carefully examined the supporting evidence and explored the factors that contributed to this shift.

Evidence of diminishing size of new housing

First, I will examine the data on the size of new dwellings. Depending on the national statistics, the data are either on building permits, housing starts, or completions of dwellings. The figure below shows the evolution of the average size of new dwellings in selected countries.

Figure: Average size of newly built housing in selected countries

Figure: Average size of newly built housing in selected countries

Sources: Statbel, Destatis, Statistics Denmark, INSEE, Central Bureau of Statistics of Irland, ISTAT, Statistics Bureau of Japan, SSB, Statistics Poland, CSU RSFSR, and Rosstat

Note: Dashed vertical lines indicate the year when the peak in new housing size was reached.

The above figure illustrates a common trend observed in several countries: the average size of newly constructed homes peaked and then began to decline. However, the timing of this peak varied by country. In Belgium, France, Japan, and Norway, for example, the peak was achieved at the turn of the century. France experienced this shift in 2004, while Denmark, and Ireland followed a similar pattern after the Great Recession of 2008–2009. In Italy, the average floor space of new dwellings began declining in 2019.

Even among developed countries, there are significant differences in dwelling size. Due to the large proportion of single-family houses in the total housing stock and in the newly built housing, the dwelling sizes in Belgium and Norway are substantially larger than in other countries in the sample. In Japan, the size of newly built dwellings is substantially smaller than in Belgium and Norway.

Possible explanations of declining home size

Four factors — both on supply and demand side — have potentially contributed to the phenomenon of decreasing average size of the newly built dwellings.

First, the current demographic transition leads to shrinking household sizes and smaller families require less living space (Ellsworth-Krebs 2020; Snell 2017). For example, in Germany, the proportion of single-person households rose from 21% to 41% between 1961 and 2021. In major cities like Berlin, Hamburg, and Munich, this figure oscillates around 50%. By contrast, in 2021, the share of 1-room dwellings in the total housing stock was just 3.5%, while that of 1- and 2-room dwellings was about 13%.1 In Berlin, the proportion of smaller dwellings is somewhat higher (4.9% for 1-room dwellings, and 23.2% fro 1- and 2-room dwellings), but is still well below the proportion of single-person households.2 Figure below compares the distribution of dwellings by the number of rooms (including kitchens) to the distribution of households by the number of persons in Germany and in Berlin.

Figure: Mismatch between household and housing stock in Germany

Figure: Mismatch between household and housing stock in Germany

Sources: Destatis, Berlin-Brandenburg Statistik, and own calculations

As seen, while the majority of dwellings has four rooms or more, most households are comprised of 1 or 2 persons. This testifies a large mismatch between the housing stock and the households.

Second, since 2010, housing prices and rents rose a lot, thus, making it increasingly challenging for families to afford larger dwellings. Hence, many families must downgrade the size of housing they are going to buy or rent. Many are forced to give up their dream to live in a single-family house and switch to dwellings in multi-family buildings (Lee, Myers, and Park 2000).

Third, the rising housing prices incentivize investors to build multi-family houses instead of single-family houses, since the former allow them obtaining higher returns on their investment than the latter: the same building plot can be used to build a handful of single-family houses or a large building with dozens of flats. Indeed, there is a notable transformation in the composition of newly constructed housing, with a greater emphasis on multi-family dwellings. In Germany, for instance, between 2001 and 2022, the proportion of dwellings in new multi-family residential buildings (buildings with 3 and more dwellings) compared to the total number of newly built dwellings in residential buildings increased from 34% to 58%. Typically, flats within multi-family houses are smaller than single-family homes. Figure below depicts the share of dwellings in newly built multi-family houses (residential buildings with three dwellings or more) in the total number of newly completed residential buildings.

Figure: Multi-family buildings crowd out the single-family houses

Figure: Multi-family buildings crowd out the single-family houses

Sources: Destatis and own calculations

The percentage of newly constructed residential units in multi-family buildings exhibits a remarkably consistent cyclical trend, with each cycle lasting approximately 8 to 15 years. These cycles bear a striking resemblance to housing booms: during the periods of growth in these booms, the proportion of multi-family constructions rises, while in the downturn phases, it declines (see Figure below).

Figure: Housing booms in Germany: real house prices

Figure: Housing booms in Germany: real house prices

Source: Destatis, OECD, and Macrohistory

Similar relationship between housing price-to-rent ratio and number of dwellings in multi-family houses can be observed for Sweden between 1938 and 2022 (see Figure below).

Figure: Fluctuations of multi-family dwellings share in Sweden

Figure: Fluctuations of multi-family dwellings share in Sweden

Sources: SCB, OECD, Macrohistory, and own calculations

The relation is not perfect. However, three housing market booms since 1950 are accompanied by surges in the construction of multi-family housing.

Figure below shows the change in the average living area (left panel) and average number of rooms, including kitchens (right panel) per dwelling for houses with 1, 2, and 3 and more dwellings in Germany between 1993 and 2022. Moreover, similar indicators are shown for West Germany (dashed lines), since for it data are available starting from 1980.

Figure: Sizes of newly built dwellings in Germany by building types

Figure: Sizes of newly built dwellings in Germany by building types

Sources: Destatis and own calculations.

The trend of increasing dwelling sizes in single-family houses continues, contributing to the overall growth in house dimensions. Conversely, it is the size of dwellings in multi-family houses that has driven the recent decline in newly built housing sizes. Interestingly, the data for West Germany indicate that the dwelling size seems to follow a cyclical pattern similarly to the proportion of dwellings in multi-family houses. As depicted in the right panel, the number of units within multi-family houses has been steadily rising since 2004, with an increase from approximately 6 dwellings per building in 2004 to more than 10 dwellings per building in 2022. This indicates a clear tendency towards larger multi-family buildings accompanied by a reduction in individual dwelling sizes within such constructions.

A similar trend is observed in the United States. The figure below shows how the average size of completed dwellings has changed in multi-family and single-family houses.

Figure: Average size of newly built housing in the USA

Figure: Average size of newly built housing in the USA

Sources: US Census Bureau and own calculations

As can be seen, the United States experienced a decline in the size of newly constructed dwellings in multi-family homes beginning in 2008, which coincided with the start of the Great Recession. In contrast, the size of single-family dwellings continued to increase until 2015, after which it began to decrease.

Fourth, governmental land-use regulations can play a role. Thus, at the beginning of the 2020s, some municipalities in Germany (for example, in Hamburg, Munster, and Wiesbaden) have begun to ban the construction of single-family homes.3 On the one hand, such houses consume too much of the space that is scarce, especially in large cities. On the other hand, they are considered environmentally unfriendly due to their higher energy consumption and the fact that they presumably lead to more soil sealing than the multi-family buildings. Therefore, the environmentally concerned politicians are fighting against this form of housing in urban areas.

Discussion

The above evidence shows that the discrepancy between the demand and supply of housing is widening. Households are becoming smaller and demanding smaller dwellings, yet the existing housing stock is mainly made up of large dwellings. This is largely a result of decisions made decades ago when the demographic situation was radically different. For example, in 2018, three-fourths of the housing stock in Germany were dwellings constructed 30 years or more ago. The shortage of affordable housing that many societies face today is partly related to this discrepancy. This issue can be solved by changing the structure of newly built housing, which is already happening, as well as by rebuilding existing housing to adjust it to the current population structure.

The observed reduction in floor space in newly built housing also has positive implications for reduced energy consumption. Research shows that living space is the main determinant of residential energy consumption (Huebner et al. 2015; Huebner and Shipworth 2017).

Due to the low construction rates observed in developed countries, it will perhaps take decades before the smaller sizes of newly built housing noticeably affect the average floor space of existing homes. However, it is important to note that we are already in the midst of this process.

References

Ellsworth-Krebs, Katherine. 2020. “Implications of Declining Household Sizes and Expectations of Home Comfort for Domestic Energy Demand.” Nature Energy 5 (1): 20–25.
Huebner, Gesche M, Ian Hamilton, Zaid Chalabi, David Shipworth, and Tadj Oreszczyn. 2015. “Explaining Domestic Energy Consumption — the Comparative Contribution of Building Factors, Socio-Demographics, Behaviours and Attitudes.” Applied Energy 159: 589–600.
Huebner, Gesche M, and David Shipworth. 2017. “All about Size? — the Potential of Downsizing in Reducing Energy Demand.” Applied Energy 186: 226–33.
Lee, Seong Woo, Dowell Myers, and Heon Soo Park. 2000. “An Econometric Model of Homeownership: Single-Family and Multifamily Housing Option.” Environment and Planning A 32 (11): 1959–76.
Snell, Keith DM. 2017. “The Rise of Living Alone and Loneliness in History.” Social History 42 (1): 2–28.

  1. See Destatis “Wohnungsbestand in Deutschland”; https://www.destatis.de/DE/Themen/Gesellschaft-Umwelt/Wohnen/Tabellen/liste-wohnungsbestand.html#115202.↩︎

  2. See Statistik Berlin Brandenburg “Wohnungen nach der Anzahl der Räume: Anteil in %”; https://www.statistik-berlin-brandenburg.de/f-i-1-j.↩︎

  3. See, for instance, Jana Werner (2021) “In Hamburg ist ein Traum linker Ideologen wahr geworden” Welt (https://www.welt.de/regionales/hamburg/article225612769/Verbot-von-Einfamilienhaeusern-In-Hamburg-ist-ein-Traum-linker-Ideologen-wahr-geworden.html), Oliver Bock (2023) “Dem Häuslebauer geht der Boden aus” Frankfurter Allgemeine Zeitung (https://www.faz.net/aktuell/rhein-main/frankfurt/neubau-wiesbaden-will-keine-einfamilienhaeuser-mehr-zulassen-18913524.html), and Amy Walker (2023) “Klimaschutz: In diesen Gemeinden dürfen keine Einfamilienhäuser mehr gebaut werden” Merkur (https://www.merkur.de/wirtschaft/in-diesen-gemeinden-duerfen-keine-einfamilienhaeuser-mehr-gebaut-werden-klima-92302511.html).↩︎