Demographic and Financial Determinants of Housing Choice in Retirement and the Rise of Senior Living

Abstract

This study examines the demographic and financial determinants of housing choices of older Americans, and how they have changed over the past several decades. Using logistic regressions with the Panel Study of Income Dynamics (PSID), a nationally representative longitudinal survey from 1968 to 2011, we find that in earlier periods, greater wealth was associated with “aging in place” and a lower likelihood of living in senior housing. More recently, the relationship between wealth and senior housing has changed, and higher wealth has become associated with increased senior living. Underlying this change is a shift in the mix of senior facilities, from predominantly those focused on medical needs and skilled nursing to newer retirement communities with a higher level of non-medical services, activities and amenities. 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.

These trends suggest that the aging Baby Boom generation’s effects on senior living communities may extend beyond those merely related to its size. With a large number of high-wealth individuals in the Baby Boom generation, demand for high-end retirement communities may experience a particular rise in the years ahead. The age at which older Americans move into a senior facility has 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.

Keywords: Housing demand, demographic trends, elderly

JEL Classification: J11, J14, R21