Divorce law reforms and house prices in Europe

Abstract This study investigates the static and dynamic effects of legal reforms facilitating divorce on housing prices. Multiple mechanisms, such as variations in housing demand and supply, can be influenced by these law reforms. On the one hand, divorced individuals often require separate dwellings, thus increasing housing demand. On the other hand, an increase in supply is often precipitated by the divorcées needing to sell their married home. Detailed information was collected regarding the historical changes in divorce laws across ten European countries from 1960 to 2008. This data was combined with information from the annual Real House Price Index developed by Knoll et al. (Am Econ Rev 107:331–353, 2017). The study regards the divorce law reforms as providing a quasi-experimental setting. This is primarily because the entry timings of these reforms differ across countries and their target is not regulation of the housing market, but rather to simplify the dissolution of marriages. The study finds that divorce law reforms accounted for a substantial 22% of the average interannual increment in the Real House Price Index, particularly 3–6 years post reforms. Such a short-term, yet significant, impact was found to be consistent even after performing identification checks and including time-variant and invariant controls.