While the concept of aging in place appears to be gaining hold as a response to isolation and excessive consumption culture, the reality is that many retirees may have little choice but to remain in a property that does not meet their needs.
The problem appears to be twofold: purchasing a house is very expensive due to high interest rates and a lack of inventory, but on the other side of that coin, most baby boomers own a large portion of the market, with their properties being large and unaffordable for the young families they were designed for.
According to a recent Redfin research, 78% of baby boomers intend to remain in their current homes during retirement.
Furthermore, according to Redfin study from 2022, empty-nest boomers occupy 28.2% of all “large homes” (those with three or more bedrooms). In contrast, millennials, who are more likely to have children at home, own only 14.2% of these homes.
Seniors downsizing and freeing up family homes is a thing of the past in many regions, owing primarily to cost, and the implications are only now being noticed.
Alexandra Gupta, a New York City real estate broker, told Newsweek that “Baby Boomers are increasingly choosing to ‘age in place,’ which means staying in their homes longer rather than selling to downsize or relocate.” This practice is directly contributing to the housing crunch by keeping millions of properties that would otherwise be offered to younger purchasers occupied.
However, these residences were not originally intended to serve as 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. Downsizing is difficult, but downsizing to an accessible home is nearly impossible, as fewer than 5% of the housing supply in the United States is accessible, according to a CNBC analysis in 2023.
Why retirees are not moving
Ralph DiBugnara, founder and president of Home Qualified, sums up the issue. “The largest issue I see facing homeowners today is that they are equity rich, cash poor, and have less alternatives for fixing it due to high loan rates and home prices.
Baby Boomers want to move or downsize but are unable to do so due to a dearth of available homes, which has driven up costs. This, combined with the expensive cost of a new home owing to rising loan rates and insurance prices, keeps them stuck in homes with equity. This is also a major contributing cause to the market’s inventory shortfall.
So the option remains to install accessible adaptations such as elevators, larger hallways, ramps, and other mobility aids, which not only increase the cost of a home but also appear to devalue it for prospective youthful buyers who do not require these accommodations.
According to a 2021 National Association of Home Builders study of homebuyer views, 56 percent of respondents stated they would not buy a home if it included an elevator, which is required for wheelchair users living in multi-floor properties.
Other improvements, such as broad corridors and step-free entry, were deemed desirable by the majority of those polled, but may lead to price increases.
The effects of this trend is quite real and felt by many, as Gupta explains. Many Boomers have significant home equity, which has enabled them to use their property to build wealth or ensure retirement. Younger generations may struggle to accumulate similar wealth through homeownership.
As real estate becomes increasingly out of reach for younger buyers, the wealth gap between Boomers and following generations may increase, with homeownership becoming an even more important driver of financial inequality.
As more Boomers age in place or choose to downsize into more accessible housing options, the rental market may see an increase in demand for senior-friendly properties.
Millennials and Gen Z, who are already delaying purchase owing to rising prices, may increasingly opt for longer-term rentals. This might contribute to increased rents, particularly in desirable metropolitan locations, as younger people postpone owning homes, further limiting their capacity to save for down payments.
What are some solutions?
It will not be easy and will require a coordinated effort, but Jesse Saginor, associate professor of real estate development at the University of Maryland School of Architecture, Planning, and Preservation, suggests a few alternatives.
“One option is to greatly boost financing, subsidies, tax credits, and/or zoning flexibility to allow for the construction of affordable senior housing so that seniors, many of whom rely only on Social Security, have somewhere to live.
As a result, that approach focuses on providing elders with affordable and, if willing to relocate, reachable homes. It eliminates the monetary barrier to shifting to home for those with fixed incomes.”
However, Saginor continued, “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.”
