As the American population ages, new demands for housing are emerging. Among these residential requirements are structural changes to accommodate aging in place, retrofitting existing housing to improve energy efficiency and new construction that meets the design preferences of homebuyers 50 years of age and older.
From 1980 to 2010, decennial Census data demonstrate the dramatic growth of the senior population. In 1980, the count of individuals aged 65 and older totaled 25.5 million. In 2010, that count had grown almost 58 percent to 40.3 million. As a share of the total population, seniors expanded from 11.3 percent to more than 13 percent. And those numbers will continue to rise. By the beginning of 2025, the total population aged 65 and older will rise by more than 60 percent to almost 65 million individuals.
And given the life-cycle of housing tenure, with younger households renting as they save for a downpayment for a home, older Americans correspondingly have higher homeownership rates. For example, the homeownership rate for those aged 65 and older was 81.1 percent in 2012, compared to 65.4 percent for the overall population. And according to AARP, 89 percent of individuals 50 or older wish to remain in their own homes in their retirement years.
A result of these factors is the rise of housing oriented toward aging in place, which in turn is an expanding area of business for remodelers. Information from the National Association of Home Builders Remodelers indicates that 72 percent of remodelers perform aging-in-place remodeling. In fact according to NAHB, remodeling for seniors is expected to be the number-two issue for remodelers over the next five years, trailing only the availability of skilled labor as a business challenge.
These remodeling features include brighter lighting, low-maintenance exteriors, open floor plans and a master bedroom and bath on the first floor. For instance, 27 percent of 65+ homebuyers preferred first-floor master suites according to the 2012 NAHB Consumer Preference Survey.
Smaller enhancements reported by remodelers include grab bars, curbless showers, wider doorways and ramps. A Certified Aging-in-Place specialist (CAPS) will know the tricks of the trade to make these changes, including lighting strategies, potential elevator installation and even color contrasts and other design features.
Other popular improvements for existing homes are energy-efficient upgrades. Making a home energy efficient lowers monthly utility bills, which in turn can act as an important check against rising energy costs, particularly for older individuals on fixed incomes. According to the 2012 NAHB survey, 41 percent of those aged 65 or older looked for energy-efficient features – the top upgrade response for this age group. Moreover, 50 percent of prospective senior buyers ranked as "very important" low utility costs in a future purchase. And these improvements can include remodeling projects to replace windows, doors, HVAC units and appliances, but also to install power production property such as solar panels and geothermal heat pumps. Existing tax credits plus high regional energy costs can make such investments pay over the long run.
Of course, some seniors will look toward new construction in order to meet their future housing needs. According to the NAHB preference survey, 47 percent of prospective homebuyers aged 65 or older preferred new construction for their next home. And among prospective senior buyers of new and existing homes, 74 percent reported wanting to purchase a single-family home or townhouse for their next residence. And for this market segment, builder confidence continues to improve. During the third quarter of 2013, the NAHB 55+ single-family index increased 14 points year-over-year to a level of 50, the highest third-quarter result since 2008.
With demand rising for senior housing construction and improvements, and builders reportedly more confident about business conditions, this is a sector that promises growth and job creation in the years ahead. Enabling such improvements will depend in part on the ability to homeowners to access equity in their homes. For example, with respect to households aged 55 and older with incomes $35,000 to $60,000, the Federal Reserve’s 2010 of Survey of Consumer Finances, a wealth survey, indicates that typically just under half of the household’s wealth is in the form of residential equity. For this reason, protecting the home equity loan component of the mortgage interest deduction for remodeling purposes is key to supporting the senior housing market. And for homeowners seeking to move from their existing home, ensuring policies that allow first-time buyers to purchase a home is critical for both buyers and sellers.
Robert D. Dietz is an economist with the National Association of Home Builders. Previously an economist with the Congressional Joint Committee on Taxation, Robert writes on housing and policy issues at NAHB's Eye on Housing blog and @dietz_econ on Twitter.