Understanding and Addressing the Housing Needs of Older Adults

In general, meeting the housing needs of seniors can be complicated by lower incomes in later life combined with higher healthcare costs.

The recent substantial rise in the number of older adults in the United States is exacerbating the nation's ongoing housing crisis as seniors with falling incomes struggle to find affordable housing that supports their health and well-being. A recent workshop hosted by Fannie Mae and the Federal Reserve Bank of Philadelphia highlighted research that grappled with the impact of demographic shifts, including the aging U.S. population, on housing demand. In a session held on October 24, 2024, chaired by Chris Mayer, professor of finance at Columbia University and chief executive officer of Longbridge Financial, researchers presented findings on various aspects of this issue, including the intersection between housing costs, health care, and equity.

Care Costs Contribute to Affordability Crisis

The housing needs of seniors are characterized in part by lower incomes and higher costs, including the cost of health care. Peyton Whitney and Samara Scheckler of the Joint Center for Housing Studies at Harvard University presented findings from a research paper coauthored with Jennifer Molinsky, "Older Adults Struggle to Meet the Dual Burden of Housing and Care," that explores the impact of complications associated with aging on senior households' ability to afford housing. Whitney noted that nearly 70 percent of adults aged 65 and older will need to purchase long-term care (LTC) services at some point in their lives, yet their ability to purchase this care is constrained by high costs and limited public assistance. The authors analyzed 9.9 million households with individuals over age 75 to estimate older adults' current ability to afford housing and daily LTC service, identify disparities, and consider opportunities for improvement.

Their analysis found that only 24 percent of older adults earned enough income to pay for housing, living expenses, and daily LTC service, which cost $67,000 per year at median for a population with a median annual income of $40,000. Shortfalls were even more pronounced among individuals with functional difficulties and households of color, particularly Black and Hispanic individuals, who are more likely to experience functional difficulties at younger ages. The authors projected the impact of three possible interventions: extending rental subsidy programs to all eligible households enabled 42,000 more households to afford housing and LTC, whereas fully funding LTC services for anyone enrolled in Medicaid enabled another 1.5 million. Another scenario, in which homeowning seniors used home equity to pay for LTC, made LTC affordable for an additional 1.6 million households; however, Whitney noted that doing so came with "serious implications" for intergenerational wealth transfers and existing racial inequalities in homeownership. Expanding LTC access with more programs, realigned eligibility criteria, and investments in community infrastructure could help alleviate the "dual burden" of housing and LTC.

Impact of Shared Living Arrangements

Shared living arrangements (in which an adult lives with another adult that is not a romantic partner) may offer relief for senior households struggling with housing cost burdens. Lucas Taulbee of the University of Kentucky presented a recent paper, coauthored with Hope Harvey and Kristin L. Perkins, that explored how living in a shared household affects seniors' housing cost burdens. The authors drew on individual-level data from the Survey of Income and Program Participation to understand how adults over the age of 65 fared financially in these arrangements. Acknowledging that shared households can arise for many reasons, Taulbee and colleagues considered traits such as age, gender, race and ethnicity, and intergenerational ties in their analysis. The analysis also considered whether the older adults in the household were "hosts" (leaseholders or mortgage holders) or "guests" and whether the older household members lived with their adult children in intergenerational households, other relatives, or nonrelatives.

Researchers found that 23 percent of older adults live in shared households, 16 percent as hosts and 7 percent as guests. Most shared households were intergenerational, and older adults living in these arrangements were more likely to be people of color, have higher rates of disability, and have lower incomes. Overall, living in a shared household appeared to provide a financial safety net for guests, who had lower cost burdens than did adults in nonshared households and saved between $500 and $700 per month by living in another person's home. It was less clear whether hosts benefited from the arrangement. Taulbee noted that the presence of shared households may obscure even higher housing cost burdens among Black, Asian, and Hispanic older adults; the authors estimated that without shared households, approximately half of these households would be cost burdened.

Generational Ties Affect Senior Mobility

Intergenerational ties may further shape the housing needs of older adults by driving household mobility. Sewin Chan of New York University explored this issue while presenting findings from her research paper coauthored with Jaclene Begley, "Older Households Are Moving Closer to Their Adult Children: Implications for Urban Planning and Housing Policy." Begley and Chan examined moves by households with people aged 50 to 84 who had at least one child older than 25. They looked at whether these households' moves increased their proximity to adult children and grandchildren; whether those moves led to more "in-kind assistance," or unpaid caregiving, from adult children; and whether these moves revealed any trends in housing characteristics.

Chan and Begley's predictive models suggest that the location of adult children plays a role in where older households choose to move. Older adults were more likely to move to areas closer to their adult children, especially following retirement or the development of new difficulties with activities of daily living. Households moving closer to adult children also received more in-kind care, and they tended to move into smaller homes. Meanwhile, households that lived at least 30 miles from their children were less likely to live in high-density areas or accessible homes. Chan noted that because adult children and grandchildren tend to favor higher-density metropolitan areas, these areas will need to invest in a diverse, accessible housing stock and age-friendly amenities.

Home Equity as a Solution for Intergenerational Wealth

Homeownership can be a potential buffer against rising housing costs and a way to promote affordability for multiple generations. Kimberly Luchtenberg of American University discussed a recent paper, coauthored with Ashleigh Eldemire and Matthew M. Wynter, that focused on low-income senior households who transitioned to homeownership through HUD's Housing Choice Voucher Homeownership program. The authors considered the financial impact of the transition, whether the program contributed to existing racial disparities in homeownership, and whether family structure affects outcomes. Drawing on HUD program data from 2000 to 2020, researchers selected 2,273 unique low-income households with individuals older than 62 and examined their financial outcomes both as renters and as homeowners.

They found that homeownership had a stabilizing effect on households' finances. Seniors who became homeowners were able to preserve more wealth as their liquid savings declined. According to Luchtenberg, the program can provide insurance against loss of income. These benefits extended to minority-led households and were even more pronounced for "coresident" households, or those with dependent children who rely on seniors (often grandparents) for care; Luchtenberg noted that these households face distinct financial challenges, including the costs of childrearing and limited eligibility for public assistance. Transitioning to homeownership reduced disparities between coresident and noncoresident households by 89 percent. Owning a home earlier in life and buying a home in a low-poverty neighborhood seemed to extend these benefits further.

Overlapping Housing Needs of Seniors

The research discussed in the session concluded that the household structure, mobility choices, and the caregiving needs of older adults are implicitly tied to the decisions and needs of other generations and may influence the financial impact of homeownership.