What are the best options for the millions of single-family homes that may be left behind by Baby Boomers as they age, many of which are in suburban or exurban communities? Is it realistic to retrofit homes and neighborhoods to accommodate changing demand?
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Perhaps no trend will have greater significance on the American economy than the aging of the American population. We are getting older, with little chance that new immigration or increased fertility will balance out the “pig in the python” that is the Baby Boomers. While everyone has a pet theory about how the aging of America will impact our housing markets, the reality is that we simply don’t know where and how retiring Baby Boomers want to live. Accordingly our best preparation is to maintain a dynamic, flexible and open housing market.
As households age and retire, some urban enthusiasts saw this as a potential re-birth of the city. After all, no longer having to worry about school quality and looking for pedestrian friendly and culture rich neighborhoods, the elderly would flock to the city in droves. Only thing was: it didn’t happen, at least not yet. From 2010 to 2011, for every one person, aged 75 or older, who moved into a central city from either the suburbs or rural areas, two persons left. This trend is even more pronounced for those just retiring, aged between 65 and 74. Perhaps younger Baby Boomers will be different, but there is little reason to believe so. Part of this trend is also regional. The South and West continue to gain elderly residents, while the Northeast and Midwest continue to lose.
Of course the emphasis on mobility should not mask the fact that the vast majority of the elderly do not move and display little intention to. From 2010 to 2011, only about 3 percent of individuals over age 65 moved, and two-thirds of those movers stayed within the same county. The strongest preference of the elderly is to age in place. There is little reason to believe this will change with the Baby Boomers. There appears little correlation between mobility and age for the elderly, with the higher income elderly displaying a slightly decreased probably of moving.
One of the worst public policy mistakes in modern history was to pretend that housing markets did not work like other markets. To deny the forces of supply and demand. That has been a costly, painful lesson. As Baby Boomers age, most in place, their demand for housing, and housing modifications, will be reflected in pricing differences. To the extent that these retirees wish to, and can afford to, retrofit their homes, they will. For those who wish to be closer to family, local land use planning should accommodate changes, such as in-law suites. Cities should also streamline their permitting process so that regulatory costs do not make retrofits prohibitive. Again the best solution for dealing with an uncertain future is to encourage a flexible housing market that can quickly adjust to changes in demand and supply.
Mark A. Calabria is Director of Financial Regulation Studies at the Cato Institute.
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