While the trend of aging in place appears to be gaining momentum as a response to loneliness and excess consumption culture, many retirees may find themselves forced to stay in a residence that does not meet their needs.
The issue is twofold: purchasing a house is costly due to high interest rates and limited inventory. However, many baby boomers own large properties that are unaffordable for young families.
According to a recent Redfin poll, 78% of baby boomers plan to stay in their present house throughout retirement. According to a 2022 Redfin analysis, empty-nest boomers account for 28.2% of all “large homes” with three or more bedrooms. Although more likely to have children, millennials own only 14.2% of such homes.
In many regions, seniors are downsizing and freeing up family homes due to cost concerns, and the implications are only now becoming apparent.
According to New York City real estate consultant Alexandra Gupta, baby boomers are opting to “age in place,” which means staying in their homes for longer periods of time rather than selling and moving. This trend is directly contributing to the housing scarcity, as it occupies millions of properties that could otherwise be available to younger buyers.
However, the original design of these residences did not include an elderly care facility. Retrofitting accessible goods such as ramps or elevators, upgrading bathrooms to accommodate zero-entry showers, and so on are all costly steps that persons with fixed incomes cannot afford. According to a CNBC study in 2023, fewer than 5% of the U.S. housing supply is accessible, making downsizing even more challenging.
Why retirees are not moving
Ralph DiBugnara, the founder and president of Home Qualified, summarizes the issue. Homeowners are now faced with the dilemma of having equity but no cash due to high loan rates and home prices, which limits their alternatives for resolving the situation. Baby Boomers are unable to relocate or downsize due to high housing costs and a scarcity of viable options. Due to the high cost of a new home, rising interest rates, and insurance costs, many Baby Boomers have remained in their equity-rich homes. This is also a significant contributor to the market’s inventory shortfall.
So the option remains to build accessible adaptations such as elevators, longer hallways, ramps, and other mobility aids, which not only raise the price of a home but also appear to devalue it for prospective young purchasers who do not require these features.
According to a 2021 National Association of Home Builders survey, 56% of respondents would not buy a home with an elevator, which is required for wheelchair users living in multi-story buildings. The majority of respondents said further changes, such as spacious corridors and step-free entry, were desirable, but they could result in price rises.
According to Gupta, boomers’ dominance in the housing market has a big impact on the economy. Boomers frequently have large home equity, which they can use to grow wealth or save for retirement. Younger generations may struggle to build comparable wealth through homeownership. As real estate prices rise for younger buyers, the wealth gap between Boomers and future generations may widen, making homeownership a major cause of financial inequality. As Baby Boomers age in place or downsize, the rental market may see increased demand for senior-friendly housing. Millennials and Gen Z, who are already delaying purchases because to rising prices, may increasingly prefer longer-term leases. This may contribute to higher rents, particularly in desired metropolitan areas, as younger people postpone purchasing homes, further reducing their ability to save for down payments.
What are some solutions?
Jesse Saginor, an associate professor of real estate development at the University of Maryland School of Architecture, Planning, and Preservation, proposes various options that will necessitate a joint effort.
One approach is to provide financing, subsidies, tax credits, and/or zoning flexibility in order to develop affordable senior housing. This is particularly significant for seniors who rely only on Social Security. This strategy seeks to provide affordable and accessible housing for seniors who are willing to relocate. It makes it less expensive for people on fixed incomes to move into their own houses.”
According to Saginor, “until we build for all segments of population in terms of income and age, there are bound to be shortages irrespective of mortgage rates and inflation, because the demand for housing tends to be dynamic while the supply of housing is largely static.”
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