Baby Boomers’ housing preferences are shifting and this is having an impact on whether they will wish to age in place in the future, says a recent report from the National Association of Real Estate Investment Trusts (NAREIT).
Using data with the Panel Study of Income Dynamics (PSID), a nationally representative survey from 1968 to 2011, NAREIT finds that the relationship between wealth and senior housing has changed over the years.
Two generations ago, most American seniors stayed in their homes for as long as physically possible, leaving only when physical infirmity or medical needs arose, in which case they would relocate to a nursing home. But with the rise of senior living communities over the past several decades, more older adults have opted to (and continue to) live in senior housing facilities than prior generations—a shift that has largely to do with personal wealth.
“In contrast to earlier periods, where higher levels of wealth were associated with aging in place and a lower likelihood of living in a senior facility, we find that higher wealth levels in more recent years are associated with increased choice of senior living,” write Calvin Schnure, NAREIT senior vice president of research and economic analysis, and Shruthi Venkatesh, manager of research and industry information at NAREIT.
The PSID survey includes over 18,000 individuals in 5,000 families in the U.S., sampling individuals and their descendants every year from 1968 to 1997, and every two years from 1999 to 2011.
Wealth can have different effects on seniors’ housing choices. Higher levels of wealth allow an older adult to afford a greater range of accommodations, while also allowing them to pay for services that make it possible to age in place rather than move into shared living or senior living environments.
While this suggests a negative relationship between wealth and the probability of residing in a senior living facility, on the other hand, many large-scale senior housing communities require an entrance fee or purchase, thus limiting residency to those with sufficient financial resources as these fees can range anywhere between $100,000 to $1 million, according to AARP.
Seniors living in multifamily residences typically have the lowest net worth of all the types of housing, while single-family heads of household generally are among the wealthiest, according to NAREIT’s analysis.
The median net worth among multifamily is between one and two times the national median among the older groups, while the median net worth among those living in single-family homes is four to five times the national median across the age groups.
“This pattern of higher wealth among single family residents is not surprising, of course, given that it takes a certain amount of wealth and income to buy a home in the first place, and also that the net worth of many households includes capital gains on their home,” write Schnure and Venkatesh.
Whereas in earlier decades the decision to move to senior living was triggered by a health care need, today that choice is increasingly motivated by other lifestyle considerations.
“The move to senior housing has become, for many older Americans, a choice of lifestyle rather than a move based on medical or nursing needs,” write Schnure and Venkatesh. “These trends suggest that the aging Baby Boom generation will have effects beyond what one might expect based simply on it being a larger generation than the one that preceded it.”
Coupling the growth of the overall senior housing sector with the shift towards facilities that offer higher levels of services and amenities, along with the changing relationship between wealth and residency, NAREIT suggests that many more Boomers may choose to live in senior housing communities at a higher rate than their earlier generational counterparts, and may do so at younger ages.
“The age at which older Americans move into a senior facility has also shifted forward over the past two generations, and the front edge of the Baby Boom generation will soon be approaching the age range when moving to a senior community becomes a realistic consideration,” write Schnure and Venkatesh.
Access the NAREIT report.
Written by Jason Oliva