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New research finds this trend is happening as gaps in wealth are becoming more stark between high and low income baby boomers and others approaching retirement age.
The number of Americans age 65 and over who are burdened by housing costs is reaching new heights, while the income gap between high and low earners in the age group is growing wider, according to new research.
These and other findings presented in a report the Harvard Joint Center for Housing Studies released on Wednesday raise concerns about the financial well-being and housing security of older Americans as more baby boomers reach retirement age.
Projections cited in the report indicate that the share of U.S. households age 65 and older will rise to 34% by 2038 from 26% last year. During that same timeframe the number of households with people in their eighties or older are expected to increase to nearly 18 million from around 8 million.
These demographic trends could present challenges for state and local policy makers when it comes to areas like affordable housing, transportation, and in-home care.
“Commitments to create age-friendly communities and some recent funding for affordable housing construction for older adults are promising starts,” Chris Herbert, managing director of the Joint Center for Housing Studies, said in a statement.
“But the time for innovation—in the design, finance, construction, and regulation of housing—is now,” he added.
The report points out that from 2012 to 2017 median incomes for households in the top 10% of earners age 65 and over grew by 22%, while median incomes fell about 4% for the bottom 10% of earners.
For the highest earners in the 50 to 64 year-old age bracket, median income reached a new record high of nearly $204,000 in 2017. But at the low end of the earnings ladder, the median was $14,400, a decline from 2000 when the level for this group was $17,100.
The differences are even starker when it comes to wealth. Home equity gives homeowners a significant boost over renters when it comes to wealth, the report explains.
Homeowners age 65 and older in 2016 had a median net wealth of a about $319,000. In contrast, it was just $6,700 for a renter the same age. Even when comparing people in similar income ranges, homeowners tend to have higher levels of net wealth than renters.
The report defines “cost-burdened” households as those paying more than 30% of their incomes for housing and says the number of 65-and-over households that exceeded that threshold grew by about 200,000 to a new high of nearly 10 million between 2016 and 2017.
Renters and homeowners still paying off mortgages were more likely than homeowners without mortgage debt to be cost burdened.
Older people living in and around cities are especially likely to be saddled with weighty housing costs. The report says areas around Trenton, New Jersey; New York City; and Bridgeport, Connecticut had the largest share of these cost-burdened homeowners in 2017.
Cost burden rates are highest for renters in the metro regions that include places like East Stroudsburg, Pennsylvania; Las Cruces, New Mexico; and Lawrence, Kansas.
The researchers also highlight some of the disparities between racial and ethnic groups when it comes to homeownership.
For instance, the share of white households age 65 and older that own homes was nearly 20 percentage points higher than black households in 2018, marking a 30-year high. A similar gap, of around 18 percentage points, existed between whites and Hispanics.
“These inequalities are important because homeownership provides older households greater housing security and more predictable housing costs than renting,” the report's authors wrote. “Owners can also reduce their costs substantially by paying off their mortgages.”
Older households who have paid off their mortgages typically paid about $458 in monthly housing costs in 2017, they added. That’s compared to $830 for older renters and about $1,300 for people in the 65 and above age bracket still making mortgage payments.
The homeownership rate for all households with people who are 65 and over last year was around 78%. That’s down from 81% in 2012.
Households in the next youngest age bracket ranging from 50-64 had a home ownership rate of about 74% in 2018. The report notes that people in this age group are approaching retirement with lower homeownership rates than previous generations at the same age.
A full copy of the report can be found here.
Bill Lucia is a Senior Reporter for Route Fifty and is based in Olympia, Washington.
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