Should Seniors Rent or Own Their Residence?
Like many fleeting things, the fully paid-off home, once a constant for most seniors, is occurring less frequently. Americans over the age of 55, are shifting their patterns of home ownership. Many Baby Boomers are choosing instead to rent apartments and condominiums.
Why are seniors running away from home ownership?Why are an increasing number of seniors running away from home ownership and into rentals you ask? The answer seems to be at least two-fold. First, many seniors are falling out of love with their homes and home ownership in general. Gone are the days of every man or woman owning tools, lawnmowers, and enjoying the knowledge to use them. Also gone are the days of every man or woman looking forward to home repairs, landscaping and the pride in ownership. Today, some seniors are discovering the expense of home ownership outweighs the potential for capital appreciation and security. While some homes are energy efficient and easy to maintain, the costs of home ownership in general are far greater than they used to be because of climbing utility rates, increased maintenance expenses, higher property taxes, and insurance.
Some seniors are finding their neighborhoods, once filled with meticulous ranch homes, children and well-manicured lawns, are now strewn with poorly conditioned properties, cracked streets and an increase in crime and unwanted activity. Some homeowners want to leave behind stairs that are hard to climb, peeling paint, small closets, tiny bathrooms and other features that most older homes often have. Governmental regulations also contribute to senior housing decline. During the Obama administration, tighter credit standards for mortgages and lenders were instituted which may make obtaining a loan more difficult to those on fixed or declining incomes. Aside from declining home values and increased financial considerations, some seniors just want a lifestyle change as they age. An apartment can be an excellent opportunity to live near similarly aged neighbors and enjoy amenities such as pools, tennis and community centers. Some modern senior housing developments remove the need for cars and other travel expenses altogether by providing transportation to community events, doctors, and shopping.
Second, renting becomes more attractive to seniors who are financial risk takers. Rather than sit on $250,000 in equity in a home they already own and continue to pour money into it keeping it from depreciating, some senior homeowners would rather invest that money themselves and bet they can obtain a higher rate of return than their home's appreciation will provide. In addition to an IRA or pension from employment, the proceeds of a home sale could provide sophisticated and diligent investors additional income to upgrade their lifestyles.
Some Seniors Enjoy Home OwnershipConversely, many seniors enjoy home ownership and there are certainly compelling reasons to support their decision. Renting doesn't always mean a reduction in expenses. The Harvard Study determined that by 2025, nearly 15 million households will pay more than 50% of their income to rent. Currently, 11.8 million households pay more than 50% of their income toward rent. According to the study, rent is "affordable" if it consumes less than 30% of household income; Americans are "moderately rent-burdened" if their rent consumes 30%-50% of their income; and renters who spend more than 50% of their income on rent are considered "severely" rent burdened. Housing complexes often charge monthly assessments for landscaping, snow removal, pool cleaning, etc. Those fees can typically cost seniors $250-$1,000 per month. To that end, convenience comes at a price.
Still other seniors simply enjoy home ownership. They garden, hang laundry outside or participate in outdoor activities related to home ownership. They take pride in the stability of owning a home and the psychological aspect is often rewarding and good for their overall health. They enjoy fixing items in the home, redecorating on occasion, and welcoming friends and family to their home for holidays and special occasions. For some, the thought of having the Christmas tree located in a different spot than it has stood during their younger days is a travesty.