What Will Happen to Housing When the Baby Boomers are Gone?

by George Masnick
Senior Research Fellow

As baby boomers age and die, adult population growth will begin to fall off sharply in the coming decade. Though this decline will have a dampening effect on household growth, it will occur over several decades and much may be offset by the millennial generation beginning households of their own. Even when baby boomers do release housing back into the market, it may not be suitable for, or desired by, younger occupants, so despite slower adult population growth in the future, demand for newly built housing will persist.

According to recent Census Bureau population projections, adult population growth will start turning sharply downward later this decade (Figure 1). After increasing by close to 2.5 million each year for more than a decade, growth in the population age 20 and older will steadily decline to about 1.5 million per year by 2050, a 40 percent drop. 

Source: 2014 Census Bureau population projections 

Despite their improving life expectancies, the oldest baby boomers will soon turn 70, and begin to die off in ever-greater numbers. Today, there are about 2.6 million deaths every year, but this number will rise to over 4 million a year by 2050. Meanwhile, births are also projected to increase over the same time period, but only by about 500,000. Consequently, the rate of natural increase (births minus deaths) is projected to fall dramatically (Figure 2). Today, population growth is about evenly distributed between migration from abroad and natural increase. Under the new Census Bureau assumptions, natural increase will fall to half the level of growth from immigration by 2035, and further decline to about one third by 2050.

Source: Census Bureau 2014 population projections 

Adult population growth has generally been the primary driver of household growth in the U.S. For most years since 1990, there have been roughly 2.5 million more adults over the age of 20 compared to the year before. This growth came from the aging of those born in the U.S. 20+ years ago, as well as immigration during the past two and a half decades. On average, almost half of all persons over the age of 20 head an independent household. Therefore, the adult population growth we’ve seen over the past 25 years alone would account for annual household growth of about 1.2 million.

Actual annual household growth was either above or below 1.2 million because of shifts in the age structure of the adult population, and because of changes in age-specific rates of household formation (headship) linked to social, demographic, and economic changes. These latter changes include trends in marital status and fertility, minority composition and nativity, and employment and income, to name the most important. 

Age structure changes have had a positive effect on household growth as aging baby boomers inflated successive age groups that have higher headship rates. For example, the oldest boomers were age 35-44 in 1990, 45-54 in 2000 and 55-64 in 2010. As they aged, the share heading an independent household increased from 53.4 percent in 1990, 56.1 percent in 2000, and 58.5 percent in 2010. On the other hand, recent social, demographic, and economic trends have generally had a negative effect on age-specific rates of household formation, particularly in the younger age groups. Higher minority shares and delayed marriage have had a negative effect on headship rates, as has the Great Recession’s impact on employment and income. It is important to note, however, that not only have the effects of population aging and the broad demographic trends affecting headship rates tended to cancel each other out, but each has been small compared to that of adult population growth, numbering in the low hundreds of thousands annual net household growth or decline (Figure 3).

Source: Joint Center calculations using 1990, 2000 and 2010 decennial census data

Projected declining adult population growth because of increasing deaths will have several effects on housing markets, mentioned below. But it will not have an immediate and proportional impact on household growth for a variety of reasons. First, many initial baby boomer deaths will occur to married couples, leaving the surviving spouse to continue to head a household. Many deaths will also occur to people who do not head a household, but rather live in a household headed by children or other relatives, or in institutional settings (assisted living or nursing facilities). Declining household growth because of increased household dissolutions among the elderly will be spread out over many decades. Furthermore, when dying baby boomers do begin to have a larger impact on total net household growth, aging millennials could cause the changing age structure effect to be more positive, similar to what baby boomers exerted as they passed into middle age, offsetting the effects of declining adult population growth. It is also entirely possible that a fuller recovery from the Great Recession will reverse the fall in headship rates, further offsetting any effect of slower adult population growth. 

When we reach a point where baby boomers are releasing housing in greater numbers back to the market, however, we still cannot assume that it will proportionately reduce the demand for newly built housing to accommodate young adults. Many homes vacated by aging seniors will not be in demand by tomorrow’s young adults, being in the wrong part of the country or otherwise unsuitable (age restricted communities, for example). Some will be simply too expensive. Some “affordable” vacated homes in desirable locations will be torn down and replaced by larger and more energy efficient / amenity rich houses targeted to older buyers.  Many houses will sit on the market for long periods of time before sellers are willing to recognize that they are overpriced. Some homes in declining communities will become abandoned.

In short, while the housing market does somewhat resemble a game of musical chairs, with successive age groups “moving up” as their incomes and families grow, and older households exiting, this process can be inefficient for young adults moving into units vacated by baby boomers because of the reasons discussed. In addition, the majority of baby boom household dissolutions will not take place until after 2030. It will not be until 2060 or later that the last of the baby boomers, born in the early 1960s, will die. Between now and 2030, new construction will still be needed to meet the housing demand from the large cohorts under the age of 30 that are currently in the pipeline, and which will be further inflated by any future immigration. Where that housing will be located and what it will look like is far less certain.  

New Report: U.S. Home Improvement Industry Outpaces the Broader Housing Recovery

In the aftermath of the Great Recession, the U.S. home improvement industry has fared much better than the broader housing market, according to our new report. Emerging Trends in the Remodeling Market. While residential construction is many years away from a full recovery, the home improvement industry could post record-level spending in 2015.

A number of factors have contributed to the strengthening remodeling market: following the housing bust, many households that might have traded up to more desirable homes decided instead to improve their current homes; federal and state stimulus programs encouraged energy-efficient upgrades; and many rental property owners, responding to a surge in demand, reinvested in their properties to attract new tenants.

Additionally, with the economy strengthening and house prices recovering, spending on discretionary home improvements (remodels and additions that improve homeowner lifestyles but which can be deferred when economic conditions are uncertain) rose by almost $6 billion between 2011 and 2013, the first increase since 2007.

Improvement spending, however, has not been evenly distributed across the country. Homeowners in the nation’s top 50 remodeling markets accounted for a disproportionately large share—nearly 60 percent—of overall improvement spending. Thanks primarily to their higher incomes and home values, owners in metro areas spent 50 percent more on improvement projects on average than their non-metro counterparts in 2013 (see interactive map).  

The remodeling industry also faces a radically different landscape than before the recession. “After years of declining revenue and high failure rates, the home improvement industry is, to some extent, reinventing itself,” says Kermit Baker, director of our Remodeling Futures Program. “The industry is finding new ways to address emerging growth markets and rebuild its workforce to better serve an evolving customer base.”

Looking ahead, there are several opportunities for further growth in the remodeling industry. The retiring baby boom generation is already boosting demand for accessibility improvements that will enable owners to remain safely in their homes as they age. Additionally, growing environmental awareness holds out promise that sustainable home improvements and energy-efficient upgrades will continue to be among the fastest growing market segments.

Millennials, however, are the key to the remodeling outlook. “The millennials’ increasing presence in the rental market has already helped lift improvement spending in that segment,” says Chris Herbert, managing director of the Joint Center. “It’s only a matter of time before this generation becomes more active in the housing market, supporting stronger growth in home improvement spending for decades to come.”

Download the full report, infographic, and media kit.

Join the Twitter conversation with #HarvardRemodeling 

Why Does Mortgage Debt Continue to Rise Among Older Homeowners?

by George Masnick
Senior Research Fellow

According to the Federal Reserve Bank of New York, aggregate mortgage debt stood at $8.6 trillion in Q2 2014, down from its peak of $10.0 trillion in Q3 2008. Many have interpreted this decline as a sign that consumers have become chastened by the Great Recession’s bursting of the housing bubble and are voluntarily paying down their mortgage debt to more sustainable levels. For those thinking in such terms, I recommend a paper further analyzing the same Consumer Credit Panel data that produces the aggregate debt estimates just cited. In a masterful exercise, Fed economist Neil Bhutta concludes that the recent drop in mortgage debt has more to do with shrinking inflows than with expanding outflows, including mortgage defaults:

"While few borrowers, compared to prior years, have been increasing their mortgage debt, they also do not appear to be aggressively paying down their mortgages… It is therefore possible that many borrowers might actually be credit constrained (they would like to increase their debt, but cannot find a willing lender …).” (p. 3)

A critical limitation of the Fed’s Consumer Credit Panel data is that it includes very limited demographic information (only the age of the borrower). But Bhutta’s findings are supported by a recently released Census Bureau report on the growing wealth inequality in the U.S. that reports on trends in mortgage debt broken down by a wide variety of household demographic characteristics. These data, collected by the Survey of Income and Program Participation (SIPP), clearly show a post-Great Recession decline in the share of young households with home debt (Figure 1) – consistent with a dramatic slowing of movement into first-time homeownership. At the same time, the report also shows that the percentage of older households with home debt has continued to increase. Since 2000, the share of homeowners aged 65-69 with home debt increased by almost 33 percent, and the share of those aged 70-74 increased by almost 65 percent. This trend is consistent with today’s older owners failing to pay down their mortgages as diligently as did earlier generations. Both equity extractions to garner cash to pay for other expenditures, and simple refinancing and extending the payment period to lower monthly payment costs will slow the pace at which homeowners pay off their mortgages.

Source: Census Bureau tabulations of Survey of Income and Program Participation (SIPP) data

Moreover, among those households with home debt, overall median debt outstanding has continued to increase post-Great Recession, albeit at a diminished pace (Figure 2). The increase in median home debt is especially true among the elderly. Median outstanding home debt for homeowners aged 65-69 with a mortgage increased by 46 percent between 2000 and 2005, and another 8 percent between 2005 and 2011. The corresponding figures for 70-74 year old owners with home debt are 18 and 33 percent. This doesn’t necessarily indicate a recent rise in refinancing activity among these older households. Rather it likely is attributable to the aging of 60-64 and 65-69 year olds (with higher mortgage debt from the previous periods) into the 65-69 and 70-74 age groups.

Source: Census Bureau tabulations of Survey of Income and Program Participation (SIPP) data

Growing mortgage debt among the elderly is troubling. Declining income later in life is inevitable for most households. With mortgage payments a continuing part of the monthly household budget, in addition to real estate taxes and the expense of home repairs, many elderly with high housing cost burdens will need to postpone retirement or spend less on other needs like food or health care. Fewer will be able to draw on wealth accumulated through growth in home equity to help pay the bills late in life. Some will let their homes fall into disrepair or will be forced to sell their homes when they would prefer to age in place. This is a trend worth our continuing attention and concern. 

How Does Geographic Diversity in Age Structures Impact Housing Market Dynamics?

by George Masnick
Senior Research Fellow

As the youngest of the baby boom generation has now turned 50, there is much talk about the overall aging of the U.S. population. But recently released Census Bureau population estimates for states and counties tell a more nuanced story about the diversity in age structures in the U.S.  The census release notes that the oldest county (Sumter County-FL) has a median age of 65.5, while the youngest (Madison-ID) has a median age of 23.1.  Quite a difference!  Other counties among the oldest include Charlotte-FL (57.5), Alcona-MI (56.9), Llano-TX (56.9), and Jefferson-WA (55.9).  The five youngest counties also include Radford City-VA (23.3), Chattahoochee-GA (23.9), and Harrisonburg City-VA (24.2), and Utah County-UT (24.2).  The U.S. median age is 37.6. 

We should perhaps not be surprised that the county with the oldest population is in Florida, or that Idaho and Utah, with their Mormon influences, should have the counties with the youngest populations. But what is going on in Michigan, Texas, and Washington counties to rank among the oldest, and in Georgia and Virginia to produce places with the youngest populations?

There are three main demographic factors that influence the age structure of a population: 

1. Domestic migration patterns of both young adults and the elderly; 
2. Settlement patterns of international immigrants; 
3. Levels of fertility of both the immigrant and native born populations.  

Differences in life expectancy could also influence age structures if those differences are large.  For states and counties in the U.S., however, mortality differences are not sufficient to affect differences in median age. 

Places with net domestic out-migration of young adults, and/or in-migration of elderly will be older (younger if these migration patterns are reversed).  Florida is a destination state for retirement migration, as are North Carolina, Arizona, and other warm weather and low-tax states in the south and west.  Maine, West Virginia and many rust belt and Great Plains states lose young adults on net, so places in these states will also have an older age structure.

Immigrants tend to be young and have higher fertility compared to the native-born, so places that are immigrant destinations will be younger.  While states on the coasts and along our southern border still attract the majority of immigrants, states in the interior have increasingly become immigrant destinations as immigrant networks have spread beyond gateway states. 

Finally, fertility levels are the primary determinant of a population’s age structure.  When fertility is above replacement (more children born than reproductive-age adults in a family) the population pyramid is broader at the base, and median age is lower. The pyramid becomes more mushroom-shaped when fertility is below replacement, and median age is higher. 

When the population unit is relatively small, as with most of the counties listed above, these demographic factors can reinforce one another and create extreme values.  For larger units of population, such as large counties, metropolitan areas and states, differences should be less extreme, but they can still be significant. 

The population estimates from which median ages were calculated contain detail by race/Hispanic origin and sex, allowing us to examine the percent minority as a surrogate for the influence of immigration and the boost to overall fertility levels that immigrants and native-born minorities provide.  We can also look at a measure of recent total fertility by calculating the ratio of children age 0-4 to women in the primary reproductive ages of 20-44.  We cannot get a direct estimate of net domestic migration by age group from the published population estimates, however.  

The table at the bottom of this post, constructed from the 2013 population estimates, ranks states on median age, percent minority, and fertility.  While Florida has the county with the highest median age, the state as a whole is only the 5^th oldest, surpassed by Maine, Vermont, New Hampshire and West Virginia.  The lower the percentage minority in a state, the higher the median age (Figure 1). The oldest states are those where young immigrants and native-born minorities with higher fertility have not settled.  Maine, Vermont, West Virginia and New Hampshire rank the lowest on percent minority. In addition, the lower the total fertility rate, the higher the median age (Figure 2). This second relationship is the stronger of the two that are graphed, and the relationship holds fairly well across the entire range of fertility (discounting DC as an outlier).  The New England states collectively are also near the bottom of the ranking on total fertility.

Source: U.S. Census Bureau Population Estimates

Older states may be destination states for retirement migration, but can also have lost young adults from out-migration to states with bigger cities and more job opportunities.  For example, according to the 2012 American Community Survey, Maine gained 27,500 residents from other states during the previous year, but lost 38,500.  If most of the out-migration from Maine were young adults, the effect would be to increase the median age.

The youngest states, however, are more of a mixed bag.  Utah’s very high fertility level – the highest in the nation – is sufficient to secure its ranking as the state with the youngest median age. Utah is not completely lacking in diversity - its percent minority (20.3%) is just the 18^th lowest, but the total fertility rate in Utah is primarily driven by its non-Hispanic white population’s high rate of childbearing.  Alaska, the second youngest state, has a large minority population (mostly native Alaskans), as well as levels of fertility that are well above the U.S. average.  Its young ranking, however, is likely also determined by in-migration of young adults to work in energy and nature oriented jobs, and out-migration of the elderly to warmer climates.  The District of Columbia has achieved its ranking as the third youngest in all likelihood because of in-migration of young adults to work in Washington for a spell.  These adults are largely single, as suggested by DC’s extremely low fertility. But also contributing to DC’s young age structure is the fact that the percent minority is the highest on the mainland (64.2%).  Texas is the 4^th youngest state, both due to its high percent minority (56%) and high fertility.  Texas has received consistent growth from both immigrants and young domestic migrants in recent years.  The final state among the top five youngest is North Dakota, which has been the beneficiary of considerable in-migration of young adults to work in the booming energy sector in the western part of the state.  North Dakota’s fertility rate is also among the highest, attesting to the impact of a favorable economy on family formation.   

Geographic diversity in age structures has direct implications for housing market dynamics.  Places with younger age structures will require new construction to house young adults, both now and in the future.  If the young age structure is created by higher fertility, homes will need to be larger to accommodate larger families.  If the younger age is created by in-migration of singles, a different housing mix is required, at least in the short run. 

Places with older populations are expected to show a greater balance between supply and demand for existing housing.  An older age structure brought about by low fertility and out-migration of young adults will have less need for new construction.  This is especially true if the existing housing is located in places where young adults want to and can afford to live.  However, if future demand for existing housing by young adults or older in-migrants is not there, older adults may be less able to sell their homes, and we can expect higher rates of aging in place. In these places there would be a greater need for modification and upgrading of existing housing to help the elderly safely stay in their homes.  On the other hand, if the older age structure is primarily the result of in-migration of retirees, and if that in-migration is sustained, there will be more opportunities for new construction and for the elderly to sell their homes in order to adjust their housing needs.  

Source: 2013 Census Bureau population estimates for states and counties.

*Fertility Rate is the number of children age 0-4 per 1000 women age 20-44. 

INTERACTIVE MAP: The U.S. Population Has Aged Significantly Over the Past Two Decades

by Elizabeth La Jeunesse
Research Analyst

The older adult population has grown tremendously since the first of the baby boomers (born 1946-64) turned 50 in the mid-1990s. Between 1990 and 2010, the number of people 50 and over jumped by 35 million, an increase of 55 percent. This dramatic increase can be seen across US counties on the interactive map published as part of our new report, Housing America’s Older Adults. As the map shows, the share of population 50 and older grew substantially across the U.S. during the last two decades. In 1990, about 1 in 20 counties had a population where older adults made up 40 percent or more of its residents. These counties were mostly sprinkled throughout the Midwest and Florida. By 2010, however, that number had multiplied to around 1 in 3 counties, spread mostly across the Northeast, along the Canadian border, and into the West.

Click map to launch.  (May take a few seconds to load.)

The number of counties where half or more of the population was 50 or older also grew markedly—by a factor of more than ten—over this period. These counties can be seen in states across the nation, including Michigan, North Dakota, Texas, and Florida.

As detailed in the report, older adults all over the U.S. face a number of challenges including increasing risks of disability, isolation, and financial stress. The pressures on rural areas are particularly acute, given their larger older populations and the limited availability of services and housing options. The report documents many areas for action at all levels of government to ensure that older households are able to obtain affordable and accessible homes with the ability to remain connected to their communities and to receive needed long-term supports and services in their homes. But much of the responsibility for following through on these actions will fall on the local communities. As the map illustrates, the demand for housing to accommodate the aging population will be evident in a broad swath of communities across the country.

Housing America's Older Adults: New Report & Infographic

This week, the Joint Center released its new report, Housing America's Older Adults—Meeting the Needs of an Aging Population. According to the report, America’s older population is in the midst of unprecedented growth, but the country is not prepared to meet the housing needs of this aging group. The number of adults in the U.S. aged 50 and over is expected to grow to 132 million by 2030, an increase of more than 70 percent since 2000. But housing that is affordable, physically accessible, well-located, and coordinated with supports and services is in too short supply.

Read the full report online, or click the image below to see & share an eye-opening infographic about the report.

Older Homeowners Want to Age in Place but Aren't Focused on Accessibility

by Abbe Will
Research Analyst

With many baby boomers reaching retirement age this decade, a major shift in the age distribution of U.S. households is underway. According to recent Joint Center projections, the number of householders age 65 and over is set to increase by 9 million from 2010 to 2020. Many of these older adults will choose to remain in their current homes and “age in place” while others will look to move into homes that are better suited to their changing needs. New survey data from The Demand Institute—a joint venture between The Conference Board and Nielsen—sheds light on homeowner attitudes toward aging in place and accessibility needs, including major motivations for upcoming remodeling projects. This extensive survey, fielded in the summer of 2013, asked households about their housing attitudes, household finances, major household purchases, community and commuting, future moving intentions, housing and neighborhood needs, and home improvement plans and motivations.

A preliminary analysis of the Demand Institute’s consumer housing survey data indicates that older homeowners do not consider aging in place and home accessibility as going hand in hand. Although the vast majority of homeowners age 50 and over report that being able stay in their home as they age is very important (88 percent ranked this statement 8, 9, or 10 on a scale of 1 to 10, where 10 is extremely important), less than 35 percent of older owners place the same level of importance on having a home that is accessible to persons with special health needs or disabilities.

Indeed, 7 out of 10 older homeowners do not have any plans to move in the future, meaning they intend to age in place. But even among those who do plan to move at some time in their later years, only 36 percent cite accessibility as an important characteristic of their next home. This is a meaningful statistic given that the 2011 American Housing Survey estimates that almost 30 percent of older homeowners have a disability or significant difficulties doing typical activities around the home without assistance, which would indicate some need for home accessibility features. The share of homeowners with disability or impairments rises dramatically with age to 46.4 percent of homeowners age 70 or older.

Unfortunately, older homeowners are largely not focused on accessibility needs as part of aging in place. While 45 percent of older owners report being somewhat or very likely to do a major remodeling project (costing $2,000 or more) on their primary home in the next three years, few of them are likely to list “accommodating health needs” or “making the home easier to live in as they age” as major reasons for their next renovations. Only 8.0 percent of homeowners age 50 and over who plan to do a major remodeling project in the next three years plan to do so to accommodate the health needs of someone in the household, and only 15.3 percent want to renovate specifically to make their home easier to live in as they age. Even those older owners reporting that accessibility is important to them are not much more likely to cite accessibility (16.0 percent) and aging in place (23.4 percent) as major reasons for upcoming remodels.

Notes: Major renovations are defined here as costing $2,000 or more.  Homeowners placing high importance on accessibility ranked having a home that is accessible for people with special health needs or disabilities as 8, 9, or 10 on a scale of 1 to 10 where 10 is “extremely important.” Source: JCHS tabulations of the Demand Institute’s 2013 consumer housing survey data.

Certainly as the number and share of older households increase significantly in the coming decades, the demand for homes with accessibility features for safely aging in place will also grow substantially. Yet, given the attitudes of today’s older homeowners, the remodeling industry will need to bridge a significant gap between owners wanting to age in place and being able to do so safely with appropriate accessibility features.

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On Tuesday, September 2, the Harvard Joint Center for Housing Studies and AARP Foundation will release a new report, Housing America's Older Adults—Meeting the Needs of An Aging Population, which will look at these and other issues affecting America's aging population.

Join us for the live webcast at 11:00 a.m. (Eastern) on September 2, and follow the conversation on Twitter with #housing50.

What is Affordable Housing & What Does it Mean to Preserve It? (Five New Case Studies)

by Alexander von Hoffman
Senior Research Fellow

Even people in the housing field are not always sure what affordable housing is, and what it means to preserve it. Generally speaking, “affordable housing” connotes any privately owned dwellings that low-income people can afford to rent, and is distinct from public housing owned by government agencies.  Most often, however, people use the term to signify properties whose owners received government subsidies to help reduce the rents.

To “preserve” affordable housing means to save financially or physically endangered properties, usually by renovating and refinancing them, so that low-income tenants can still live in them. Starting in the 1960s, the federal government implemented a series of programs that gave private developers various incentives to develop and run low-income rental housing.  But these incentives – whether low-interest mortgages, rent supplements, or tax credits – all have time limits, and each year since the mid-1980s tens of thousands of them have expired, eliminating a large portion of the low-income housing stock. In addition, many of these properties have suffered the ravages of time, and required a large injection of capital to keep them habitable.

But definitions are a bit dry.  It’s more interesting to come face to face with actual projects and try to understand how they came to be developed and preserved.  I recently had the opportunity to investigate local efforts by nonprofit organizations to preserve affordable rental housing in the cities of Scranton, Asheville, Chicago, Roseville, MN, and Boston.

The first question that occurred to me was: what do these places look like?  Most of us have a sense of public housing – usually a negative image of a dilapidated high-rise in an inner-city neighborhood – but few can picture subsidized housing for low-income people.

In fact, affordable rental housing, both subsidized and unsubsidized, comes in a wide variety of types, locations, and conditions.  Yes, such housing can be found in poor, inner-city neighborhoods, but unlike public housing, much of it is also located in downtowns, middle-class neighborhoods, and suburbs. Most subsidized rental properties exist in multifamily structures, but they may take the form of traditional urban apartment buildings, modern-looking low-rise suburban-style complexes, or even elegant former hotels.

Franklin Park Apartments, Boston, MA

The origins of affordable housing projects, I discovered, vary as well.  Some were existing privately owned rental properties that were converted with the help of government subsidies. In Boston, for example, in the 1970s, an idealistic African American city planner began restoring old apartment buildings to halt the physical deterioration of the minority neighborhoods. In Chicago, community activists, alarmed at the disappearance of single-room occupancy hotels, acquired and restored a decaying apartment building to create healthy homes for those who would otherwise live on the street.

In other cases, a private developer conceived and built low-income rental housing from scratch. In 1973 a California company developed Skyview Park, a compound of one- and two-story brick buildings containing 188 one- to three-bedroom apartments, in Scranton, Pennsylvania. The developer used a government mortgage subsidy for moderate-income residences and later acquired project-based rent subsidies, which allowed very low-income tenants to live there.

Skyview Park, Scranton, PA

Contrary to stereotypes of the poor, the tenants of affordable rental housing are a diverse lot.  Often they reflect the character of the low-income population of the area in which their housing development is located. Hence, if many poor immigrants, homeless, or elderly live in an area, they will be heavily represented in the local affordable housing population.  Asheville, North Carolina, is a popular retirement community, and a large portion of the tenants of Battery Park Apartments (an elderly housing project located in the heart of the city) are poor people who, like many other city residents, came to Asheville to retire.

In contrast, some affordable housing projects function as entry points for low-income newcomers to an area. In Scranton, for instance, some 60 percent of the poor are white, but, due to a recent surge of Hispanic migrants to the area, some 70 percent of the residents of the Skyview Park development are Puerto Rican or from other Hispanic regions. The housing development has also attracted Bhutanese immigrants from Nepal, who have only just begun to arrive in Pennsylvania.

Different circumstances dictate when and why owners will go about preserving properties for low-income tenants.  Sometimes the buildings have fallen into such miserable condition that they become imperiled. In the town of Roseville, a suburb of Minneapolis-St. Paul, the aging owner neglected a modest apartment complex built years before, and the deteriorating property attracted abandoned cars and illicit activities.  A prominent Minneapolis nonprofit housing organization, Aeon, bought the property, restored its 120 small apartments, and for good measure added a new building with fifty family-size units.

Sienna Green Apartments, Roseville, MN

The situation became far worse at Scranton’s Skyview Park, which in the 1990s earned a fearsome reputation for drug dealing, shootings, and stabbings, not to mention apartments with gaping holes in the wall. When National Housing Trust/Enterprise Preservation Corporation and Evergreen Partners finished renovating Skyview Park in 2009, they had not only preserved it but they had also made it a safe place to live.

Other circumstances are not as dire but nonetheless urgent.  In 2006 Mercy Housing Lakefront in Chicago acquired Malden Arms Apartments as part of a merger with its nonprofit owner, only to discover that the building was undercapitalized and under-maintained.  Sky-high utility bills resulting from old and inefficient water and heating systems were financially bleeding the Malden Arms’ balance sheet. In addition, the property’s federal low-income housing tax credits were due to expire.  Although some urged a sale of the property, MHL successfully sought ways to refinance and renovate the Malden Arms.

Malden Arms Apartments, Chicago, IL

Fortunately for these projects, state and local government officials strongly supported the cause of preserving affordable housing.  State housing finance agency officials were crucial because they allocated federal low-income housing tax credits, which typically provide the bulk of underwriting for low-income housing projects.  Because officials wanted to see these properties maintained for low-income tenants, they advised the developers about ways they might tailor their proposals to meet state criteria for tax credits.

In Pennsylvania, state housing officials suggested that the out-of-town developers involve a local civic leader who supported housing and whose word city officials trusted.  In the case of New Franklin Park Apartments in Boston, housing finance officials enlisted the developer, The Community Builders (TCB), to acquire and preserve the project.

Battery Park Apartments, Asheville, NC

Once funding and financing are secured, however, actual renovations to low-income housing can be almost as complicated as garnering support. In Asheville, National Church Residences (NCR) took over a building fully occupied by elderly tenants, who were extremely anxious about the renovation plans of a new landlord. In addition to holding frequent meetings with residents and distributing a reassuring informational flyer, NCR and its construction company minimized the disruption by moving tenants to furnished hospitality units while their apartments were being remodeled.  At New Franklin Park Apartments in Boston, TCB faced an even more complicated problem of rehabilitating apartments (and temporarily moving their tenants) in a scattered property consisting of fifteen buildings at a dozen sites.

Some groups added another dimension to their renovation projects by using them as an opportunity to implement sustainable development.  In Roseville, for example, Aeon worked with experts from the University of Minnesota to install energy-efficient appliances, effective ventilation systems, and a storm water management system that created an attractive landscape of plantings and pools that also filtered rain water.

At a time of skyrocketing housing costs, preservation of affordable housing provides low-income people with a reasonably priced place to live, and at less expense than building new dwellings.  The idea of affordable housing preservation seems relatively simple.  I discovered in the course of my research, however, that the actual projects, people, and processes involved in carrying it out are intriguingly complex and varied.  It is my hope that this work will inspire others to take a closer look at this important part of America’s social safety net.

The Active Process of Aging in Place

by Jen Molinsky
Research Associate

America’s older population is poised for unprecedented growth. The youngest members of the baby boom population, born 1946-1964, have turned 50, while the oldest boomers have crossed the 65 threshold. Growth among 65-74 year olds is set to soar, climbing from 22 million in 2010 to an estimated 39 million by 2030, a 78 percent jump. By 2040, there will be an estimated 30 million 75-84 year olds, and another 14 million people 85 or over.

The vast majority of older adults currently live independently. This is true even among the oldest group: of those aged 85 and above, 72 percent live by themselves or with a spouse/partner in their own homes, according to the 2012 American Community Survey. With evidence that Americans of all ages are moving less, and given health care improvements that have delayed moves to institutional care, the trend toward independent living in older age is very likely to continue.

Indeed, surveys show that most people want to live independently in their current homes and communities as they age—a preference popularly called “aging in place.” In a 2010 survey of 1,600 people over aged 45, AARP found that 86 percent somewhat or strongly agreed with the statement “What I’d really like to do is stay in my current residence for as long as possible,” while 85 percent somewhat or strongly agreed “What I’d really like to do is remain in my local community for as long as possible.” A 2014 online poll by the American Planning Association found that 69 percent of 50-65 year old respondents with at least two years of college reported that staying in their homes as they got older was somewhat, very, or extremely important.

The Center for Disease Control defines aging in place as “the ability to live in one’s own home and community safely, independently, and comfortably, regardless of age, income, or ability level.” The CDC’s focus on aging in place as an “ability” is on point: because abilities may change over time, the definition hints at the dynamic nature of aging in place, rather than the absence of action and change regarding one’s living environment. The reality is that, for many, aging in place is a deliberate and dynamic process, one best undertaken with preparation including adaptations of physical space, modes of transportation, or other facets of life in advance of physical or cognitive need to do so. For some, it may even involve moving in order to set the stage to live independently for as long as possible, relocating to a new home that is more comfortable, safe, affordable, and/or convenient. Moves may be within the current community – preserving existing social connections – or outside to locations where changing needs can be better accommodated either because of more community resources or proximity to family.

And even with preparation, aging in place is an ongoing process (as literature from the field of gerontology recognizes) in which older residents renegotiate how, and indeed if, they continue to stay in their current home as their preferences and circumstances (health, finances, relationships and family and social supports) shift over time.

The CDC mentions the ability to remain in one’s community as well, and indeed a critical part of aging in place is the setting in which it occurs. Many researchers, advocates, and commentators point to the same list of elements needed to make communities more livable for all ages, including older adults: affordable, secure, and physically accessible housing; and affordable, safe, and reliable transportation alternatives for those who are unable or choose not to drive (such as mass transit, paratransit, and safe and desirable walking routes to services and amenities). Opportunities for older residents to engage with their communities in recreational, learning, cultural, volunteering, and/or social experiences, and options for in-home health care and/or assistance with activities of daily life as circumstances change are also critical.

Yet there are tremendous challenges in ensuring that our houses and communities are ready to support a high quality of life for older adults aging in place now, and the growing numbers of those who will do so in the future. Needs include more accessible housing units for those with ambulatory difficulties; a larger range of housing options for those seeking smaller, more affordable units; improved infrastructure to promote pedestrian safety; transportation alternatives to private cars;  and local services to assist older adults with home maintenance, care, and meals. The federal government has a role too, in providing financing options to help homeowners and renters modify their homes to improve safety and accessibility, supporting the growing number of low-income senior renters, and in improving collaboration between health and housing programs to ensure they are mutually supportive of aging in place.

There is much to be done to provide the needed supports for today’s older population and the coming waves of older adults engaged in the dynamic process of aging in place. A first step is for individuals to recognize the value of planning in anticipation of future needs, and for government at all levels to recognize the magnitude and importance of the challenges and opportunities associated with an aging population seeking to age in their communities. The next step is to take stock of what we already know about the best way to support aging in place and to consider how the public, nonprofit, and private sectors can innovate and bring solutions to scale. 

To help spur and inform this important discussion, the Joint Center for Housing Studies and the AARP Foundation will release a comprehensive report on this topic this fall. Housing America's Older Adults: Meeting the Needs of an Aging Population will be released at an event in Washington, DC on September 2, 2014.  Join our mailing list to receive more information this summer.

Build It and They Will Come – Or Will They?

by George Masnick
Fellow

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.  

Source: Statistical Abstract of the United States, 2010, Table 597

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.

Source: National Vital Statistics Reports, Table 4.

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.  

Although the Population is Rapidly Aging, Young Adults Will Still Drive the Demand for New Housing

by George Masnick
Fellow

Hardly a day goes by when we are not reminded about how rapidly our population will age over the next several decades as the baby boom crosses the 65+ threshold.  For housing analysts, an aging population is often thought of as the key demographic trend that will drive housing consumption over the next 20 years.  This shift in age structure does not, however, mean that elderly population growth will be the primary driver of the demand for newly built housing.  While most of the population growth will take place among the elderly, that increase, for the most part, does not represent people active in the housing market. Younger age groups will not experience much population growth, but this is because, among those under 35, large cohorts are replacing other large cohorts – sometimes a bit smaller and sometimes a bit bigger.  But most of the members of these large younger cohorts will enter the housing market for the first time in their 20s and 30s.  They will consume most of the newly built housing.  Here are the details.

The aging of the United States population is dramatically shown in Figure 1.  Between 1970 and 2010, most adult population growth took place in the under 65 age groups.  Starting in 2010, aging baby boomers begin to shift most of the population growth to the over 65 age groups.  Each decade during the past 40 years (the leading edge of the baby boom, those born 1946-1955) has provided the biggest share of population growth of any 10-year age group (lower panel of Table 1 cells highlighted in yellow).  In the 1970s, baby boomers created growth among young adults, gradually shifting the growth to older and older age groups in successive decades.  The dominance of baby boomers in the population growth equation will persist until sometime after 2030 when they begin to reach the end of their lives in large numbers.

Source: Decennial Census data and Census Bureau 2012 Middle Series Population Projections.

Notes: Shaded cells represent largest 10-year cohort in each decade (green) and largest growth (yellow).
Source: Decennial Census counts and 2012 Census Bureau middle series population projections.

Many are quick to conclude that, since population growth drives most of the demand for new housing construction, we must primarily build for the elderly.  The problem with this logic is that elderly population growth does not represent new additions to the population, and most elderly are already housed quite comfortably and show little inclination to move to a different residence. Strong elderly population growth is simply the aging of a large cohort replacing the smaller cohort that came before them - they are not new people entering the housing market.  As I’ve discussed in a previous post, for the remainder of this decade and the next, elderly baby boomers will largely age in place.  Fewer than 4 percent of the population over the age of 65 changed residence in 2012-13.  Over 80 percent of the elderly live in owner-occupied housing.  For those 65+ living in owner-occupied housing, the annual mobility rate is now about 2 percent.

Source: 2013 Current Population Survey, Table 7.

As I mentioned earlier, movers can be thought of as driving the demand for new housing since non-movers by definition stay in their current homes.  While the number of people over age 65 is growing rapidly, given the very low mobility rates of this population the number of movers that are elderly will still be small.  Multiplying the average size of each 10-year age group of adults (upper panel of Table 1) by the average percentage who change residence each year will give the annual number or persons in each age group that are expected to move over the decade.  In the 2000-2010 decade, these movers, or recent occupants, were clearly dominated by young adults age 25-34 (Figure 3).  This cohort does not have the largest population; it is about 5 million less in number compared to the baby boomers age 45-54 in 2010 (upper panel of Table 1). But at over 40 million, its size is substantial.  Having the highest rate of geographic mobility, 25-34 year olds accounted for almost three times as many recent occupants during the 2000-2010 decade as the largest baby boom cohort.  Each year during that decade, persons over the age of 65 averaged only 6.2 percent of total moves (8.5 percent in 2013).  Such low representation of the elderly among movers will persist for the foreseeable future. That share is projected to increase only slightly during the next two decades to an average of about 10 percent in 2020-2030 in spite of the large projected growth in the 65+ population.  Note that these projections likely bias upward the estimates of demand for new market housing by the elderly because the resident population used as a base in the projections include the elderly living in nursing homes and prisons.

Notes: Recent Occupancy numbers = average number of persons in age group during decade x average annual age-specific annual mobility rate.  Number of persons is average of numbers at beginning and end of decade.  Average annual mobility rate is the mean of the age-specific rates at the beginning and end of decade. Projections hold mobility rates constant at 2013 levels.

Source: see Table 1 and Figure 2.

In keeping with their lower mobility rates, older adults are underrepresented in newly built housing.  Households over the age of 65 in 2011 accounted for 22.1 percent of all households, but just 14.4 percent of occupants of units built since 2000 (Figure 4).  Among all owner heads of households, 26.9 percent were over the age of 65, but just 14.7 percent were heads in owner units built since 2000.  However, older households do account for a larger share of heads of households living in new rental units: 13.4 percent of renter heads are elderly, nearly equal to their 13.6 percent share of occupied rental units built since 2000.  This greater parity in representation of the elderly in newer rental units is consistent with the higher mobility rates of older renters compared to older owners.

                                                          

Source: Joint Center tabulations of 2011 American Housing Survey.

As the large baby boom cohorts age into the 65+ age groups, will they increase the share of elderly who live in newer housing?  An increase proportional to their growing share of the adult population (adjusted for their lower mobility rates) is certainly expected.  For example, according to recent Joint Center household projections, the elderly accounted for 23.3 percent of all households in 2014, increasing to 26.4 percent in 2020 and to 31.5 percent in 2030 when all baby boomers are over the age of 65.  If the elderly maintain their share of households living in newer units at current levels, about 20 percent of newly built units in 2030 will be occupied by heads over the age of 65.  But to increase the share of newly built housing occupied by the elderly significantly above that figure, tomorrow’s elderly will need to relocate out of older housing at higher rates than we now observe. 

For the next 15+ years, helping the elderly achieve a better fit with their housing will largely involve initiatives to support aging in place. The need for assisted living facilities and nursing homes will gradually increase as the baby boom ages, but the greatest increases will take place after 2030. Whether the elderly are likely to increase their mobility rates within market housing in the near-term future is worth considering.  Public and private efforts to provide housing that better serves the needs of an aging population could spur greater mobility among those ages 65+.  However, there are a host of demographic, social and economic characteristics of baby boomers that argue for less, not more, geographic mobility among the next generation of elderly. This topic will be the subject of a future blog post.