Monday, March 17, 2014

Build It and They Will Come – Or Will They?

by George Masnick
In a previous post, I suggested that elderly baby boomers may be less likely, in the future, to move to newly built “senior” housing in the numbers that many housing analysts expect. Baby boomers might indeed be better off if they did move – to new housing that is smaller in size, on one level, handicapped accessible, easier to care for, convenient to public transportation and/or within walking distance to shopping and services, more energy efficient, and generally more affordable (lower taxes, utility costs, upkeep, etc.).  It would appear likely that there would be a strong demand for such housing, and public and private initiatives are underway to create such housing. But will aging boomers move to it?

Arguing against a high demand for senior housing among aging baby boomers is the fact that most now live in owner occupied housing with which they are quite happy. Almost three quarters of those over the age of 45 in a recent AARP poll strongly agreed with the statement: “What I’d really like to do is stay in my current residence for as long as possible.” Owners over the age of 65 have had very low mobility rates (about 2 percent per year) that have shown no signs of increasing in recent years.  Large cohorts of young adults who will come of age over the next two decades will compete for newly built housing.  This could very well maintain recent patterns of housing consumption where the young are over-represented in newly built units and the elderly are under-represented relative to their share of all households.

In addition, there are hosts of demographic, social, and economic trends affecting aging baby boomers that argue against any significant future increase in geographic mobility for persons over the age of 65.  I will address a few in some detail and mention others in passing.

Longer Working Life – Labor force participation rates for those over the age of 65 have increased steadily since 2000, growing by 38 percent for men and 66 percent for women. Increasing life expectancy, high middle-age divorce rates coupled with lower remarriage rates among older women, and employment in jobs increasingly less likely to carry retirement benefits are all trends that support both the overall upward trend and the gender differential in elderly labor force participation. For many elderly in the labor force, going to work is something they look forward to and are not eager to give up.  An Urban Institute analysis of the 2002 Health and Retirement Survey found that over 95 percent of employed persons over the age of 65 agreed or strongly agreed that they enjoyed going to work. Longer working life will help to postpone retirement migration (although some retirees who move to retirement destinations might seek new employment there), and the longer retirement is delayed the more difficult it might be for individuals to relocate once retirement finally happens.  

More Two-Earner Households – Today, about 70 percent of baby boom wives are in the labor force (Figure 1). Given the 84 percent labor force participation of baby boom husbands, a clear majority of married couples are dual-earner households. As boomers age, we expect this cohort to have higher labor force participation rates for both men and women over the age of 65 than the generation that came before them.  This trend is significant for future elderly mobility rates.  When one spouse is “ready” to retire and the other is not (either because of age difference or preference to keep working), retirement mobility is less likely.  If both spouses postpone retirement, mobility over the age of 65 is even less likely.  

Age Differences Between Spouses – With delayed marriage and the high incidence of divorce and remarriage in the U.S., it becomes more likely that the next generation of elderly will have more marriages with large age differences between spouses. These trends further compound the effect of dual-earner couples on lowering residential mobility rates when the oldest spouse is ready to retire.

The Effects of the Great Recession – Just as one can argue that the Great Recession has given the elderly greater incentives to work later in life, the same factors have reduced housing turnover. Falling home values and loss of home equity, and a higher share with mortgages that are under water, have made selling one’s home and moving less attractive.  Even for those with low or zero outstanding mortgages, selling their home for significantly less than what it was worth before the Great Recession is a difficult pill to swallow.  There is always the hope that prices might soon rebound.  For many with mortgages that they have recently refinanced to take advantage of historically low interest rates, there might be a “lock in” effect that makes it more difficult to purchase a different house requiring a mortgage at higher rates.  These factors affect mobility rates of both the young and old. 

Population has Shifted to the South and West – Historically, retirement migration has favored Sunbelt states in the South and West.  But the majority of the population that will cross the 65+ age threshold over the next 20 years already live in the South and West (Figure 2a).  Shifting regional population concentration is a result of both historically higher birthrates in the South and West, and because these regions have been destinations for in-migrants, both domestic and foreign. A significantly higher share of the population age 45+ living in states the South and West were born in another state (Figure 2b).  In a very real sense, there is less of a need for Sunbelt retirement migration – yet another factor that could dampen aggregate baby boomer mobility rates in old age.

Source: 2012 American Community Survey from Census Bureau American Fact Finder – Table B06001

Movers vs. Stayers – Consistent with the very low mobility rates of elderly owners is the fact that a majority of owners age 65+ have been living in their current home for a long time.  According to the 2011 American Housing Survey, almost 60 percent of owners age 65+ have lived in their homes for over 20 years.  This share has been constant for the past decade.  The older the owner the higher the share, with 51 percent of owners age 65-74 being long-term residents, 64 percent who are age 75-84, and almost 75 percent of those age 85+ being 20+ year residents in their current home.  Those who are more prone to move are likely to do so when they are younger – leaving behind a residual group more likely to composed of stayers.   Many baby boomers with the highest propensities to move have already adjusted their housing before age 65 and may feel less of a need to do so in the future.

Later Age at Becoming Grandparents – More women are having their first child later in life.  Over the past four decades, the average age of first time mothers increased 4.2 years, from 21.4 years in 1970 to 25.6 years in 2011.  In many European countries, age at first birth is 3-4 years later, suggesting that there is still some room for upward movement in this trend in the U.S.  Birth rates for women over the age of 30 have increased steadily from the mid-1980s to the onset of the Great Recession (Figure 3).  Later age at childbearing has translated into later age at becoming a grandparent for the women’s parents. Today, many men and women in their 60s are becoming grandparents for the first time, and still more have a youngest grandchild who is still a toddler.  This would be particularly true for the more highly educated grandparents who were more likely to have had their own children at later ages.  While I can offer no hard data, I suspect that later age at becoming a grandparent should motivate older couples to hold onto their too-large houses to facilitate the regular (or occasional) visits from their children and young grandchildren.  Having young grandchildren would also perhaps make long-distance retirement migration less attractive.

In addition to the factors just mentioned, the development of the internet and all that it implies for communication with relatives and friends, shopping, health care, working from home, and a host of other details of daily living, could help older folks stay in their homes, if that is what they want to do, a bit longer than they might have in the past. Still, it must be acknowledged that by virtue of their very large numbers, aging baby boomers could contribute to a growing numerical demand for senior housing even if their mobility rates are lower than the previous generation’s.  My argument is that the demand just might not be as large as some are predicting. What seems certain, however, is that more focus is needed on helping seniors who are aging in place.  This includes such things as help in retrofitting and maintaining their housing; help with transportation; and supporting senior centers that provide meals, social activities, and information/advocacy across a wide scope of services that senior’s need.  

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