Homeownership and Demand for Long-Term Care

Abstract

Elderly home-owners get institutionalized less often than renters do. We hypothesize that housing tenure itself explains this behavior. Using longitudinal data from a Dutch community sample (N= 2,372) collected between 1992 and 2005, we find a negative effect of housing tenure on the probability of moving to a nursing home between two subsequent waves. This effect remains significant after controlling for health, socio-economic status and the presence of a partner and or children. We could not reduce this finding to a variety of explanations directly related to housing tenure. There was no substantial effect of higher payments for long-term care for wealthy people before 1997. Neither did we find evidence that home owners have a strategic bequest motive, and use their house to attract informal care from their children. We do find that homeowners use informal care-at-home to postpone or avoid institutionalization. Homeowners do not appear to live in houses more suitable to the needs of old age than renters, they do not have better social networks from which they can recruit informal caregivers. However, they express a greater satisfaction with their housing situation than renters, even if their health deteriorates. We therefore interpret our findings as the result of a strong desire among homeowners to stay where they are - in their own property - and better possibilities they have - as owners - to realize this desire.

Keywords: Home Equity, Health Care, Aging, Housing Tenure, Institutionalization

JEL Classification: I11, J14, R21