Retirees’ Decisions Are Shaping the US Housing Crisis – Who Will Be Most Affected?

The trend of aging in place—where retirees stay in their current homes instead of downsizing or relocating—has gained momentum. While it reflects a desire for stability and independence, for many retirees, it is not a choice but a necessity. Rising home prices, high-interest rates, and limited housing inventory have locked many baby boomers into homes that no longer suit their needs, creating a ripple effect across the housing market.

Place Trend

A Redfin study revealed that 78% of baby boomers plan to remain in their current homes during retirement. These homes, many of which are large with three or more bedrooms, were originally designed for families. Yet 28.2% of these homes are occupied by empty-nest baby boomers, compared to just 14.2% owned by millennials—the generation most likely to have young children and need larger homes.

The shift away from the once-common practice of seniors downsizing is largely due to financial constraints. Buying a smaller, more manageable home has become less feasible as interest rates rise and housing prices soar. Additionally, less than 5% of U.S. homes are accessible, making it nearly impossible for retirees to find homes that meet their mobility needs.

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Retirees

The decision to stay put is often tied to financial realities. According to Ralph DiBugnara, president of Home Qualified, many boomers are “equity rich, cash poor.” They may own their homes outright or have significant equity, but the high costs of downsizing—coupled with soaring mortgage rates and insurance premiums—leave them with few affordable options.

Even retrofitting their homes to include accessibility features like ramps, elevators, or wider hallways is expensive. These modifications not only add upfront costs but can also make properties less appealing to younger buyers, further complicating the housing market.

Economic Shift

Real estate broker Alexandra Gupta explains that aging in place has created a bottleneck in the housing market. “Baby boomers are increasingly choosing to remain in their homes longer,” she said, which limits the availability of homes for younger buyers and contributes to the ongoing housing shortage.

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Gupta highlights the broader economic effects:

• Wealth Inequality: Baby boomers hold substantial home equity, allowing them to leverage wealth or secure retirement. Millennials and Gen Z, however, struggle to achieve homeownership, widening the wealth gap between generations.
• Rising Rents: As younger buyers are priced out of the housing market, they’re forced to rent for longer periods, increasing demand and driving up rental prices—particularly in metropolitan areas.

Challenge

Many homes occupied by aging boomers were not designed with old age in mind. Making these properties accessible requires costly modifications, such as:

• Installing lifts or elevators in multi-floor properties.
• Creating step-free entries and zero-entry showers.
• Widening hallways and doorways for mobility aids.

These retrofits come with challenges. For example, a 2021 National Association of Home Builders survey found that 56% of potential homebuyers would not purchase a home with an installed elevator. On the other hand, features like step-free entries and wider hallways were seen as desirable, though they tend to drive up property costs.

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Housing Crisis

Addressing the aging-in-place trend and its effects on the housing market requires systemic change. Jesse Saginor, an associate professor of real estate development, suggests several strategies:

1. Increase Affordable Senior Housing:
   • Subsidies, tax credits, and zoning changes could incentivize the construction of affordable housing designed for seniors. This would give retirees more viable options for downsizing.
2. Support Accessibility Modifications:
   • Government programs or grants could help offset the costs of retrofitting homes for aging adults, enabling them to stay safely in their homes.
3. Build Housing for All Income Levels:
   • Saginor emphasizes the need for diverse housing options across all income and age groups. This would reduce the mismatch between housing demand and supply and alleviate market shortages.
4. Encourage Multigenerational Living:
   • Encouraging families to live together could ease the burden on both seniors and younger generations while addressing housing shortages.

A Long-Term View

Until these solutions are implemented, the housing shortage will likely persist, with both seniors and younger generations feeling the strain. As boomers continue to age in place, the lack of accessible housing and rising costs will challenge families, deepen wealth inequality, and put additional pressure on the rental market.

Addressing these challenges requires collective effort from policymakers, developers, and communities to create a balanced housing market that works for everyone.

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