Households in Developed Countries Are Shrinking, Except in Israel

The global trend in developed countries toward having less children and living in smaller households presents economic concerns, but by bucking the trend Israel creates its own set of issues

An Israeli family from Mevo'ot Yeriho.
Ohad Zwigenberg

How many people do you live with? According to the Central Bureau of Statistics, the average household size in Israel is 3.28 people due to Israel’s high birthrate, which is high for a developed economy. In most of the developed world, the number is much lower than that and has been gradually declining.

This decline particularly evident in the United States, where household size has dropped from 4.76 at the start of the 20th century to 3.14 in 1970, and falling again to a historic low of 2.53 last year. Gen Xers and millennials live in much smaller households than the generations before them.

The decline in the United States and many other places around the world is due to a combination of social and economic factors. The nuclear family has downsized, and rising incomes have let people set up their own households rather than stay inside an extended family. There was a time when, for moral and financial reasons, grandparents, parents, children and maybe an aunt or uncle all lived under one roof.

Another factor has been urbanization, as people move to bigger cities for better job prospects and services. But as they do so, they have to settle for small apartments over spacious homes.

Falling marriage rates, rising marriage ages and fewer children have also contributed to smaller households.

The phenomenon has wide-ranging economic and environmental implications. For instance, a big family living together saves a lot of money by eating at home; small households, especially singles, tend toward the more costly alternatives of going out to eat or ordering in. Bigger households use less energy per capita as well.

In Germany the average household is especially small, at just under two people, according to 2018 statistics. That number was boosted by the arrival of 1 million migrants the year before, who came in big families and live in crowded housing.

And if you look at household composition, you get a startling picture – 42% of households are made up of just one person, while 34% are  composed of two.

In the United States, the decline in household size has slowed a lot in the last decade even though fertility rates (the average number of births per woman) have been in decline since the 2008 financial crisis. In 2018, the number of births fell 2% to just 3.78 million from the year before, and over the decade, the fertility rate dropped to 1.73 from 2.1.

Homebodies.

But compared to Italy, the United States looks like a fertility power. Last year, Italy’s population shrank for the fifth year in a row because of the drop in the number of births: 435,000 babies were born that year, 5,000 fewer than in 2018 and the lowest annual total in a century. Meanwhile, 647,000 Italians died in 2019, which added up to a net loss of 116,000 people to 60.3 million (net immigration helped neutralize some of that loss).

Italy’s 78-year-old president, Sergio Mattarella, has called the situation nothing less than an existential crisis. “The fabric of our country is weakening and everything must be done to counter this phenomenon...As an old person I am well aware of the falling birth rate,” he said.

Italy’s average household size is relatively large at 2.4, but that’s because young Italians hesitate to leave their parents’ homes. Some 67% of Italians aged 18 to 34 live with their parents, 20 percentage points higher than the European average. Among men, the rate is 73%.

In the United States, fewer and fewer young adults leave their parents’ homes, and when they do they may come back due to economic difficulties. Some 63% of U.S. households number just one or two people, but American houses have room for more: 61% have three or more bedrooms, providing rooms for returning children. The trend to smaller households may well reverse.

In Israel, the population is set to grow from just over 9 million now to 10 million at the end of 2024, 15 million at the end of 2048 and 20 million in 2065. The problem won’t be shrinking households but where to build enough homes for all those millions.