Housing Wealth and Housing Decisions in Old Age: Sale and Reversion

Abstract

Population ageing brings new challenges to long-term household economic decisions. In the event of old-age dependency, housing assets become a key self-insurance device. However, little empirical evidence has been reported regarding an individual's expectations of having to use their housing wealth for such a purpose. This paper draws upon two complementary data sources to empirically examine: (1) the influence of housing assets on an individual's willingness-to-sell (WTS) their dwelling for care purposes, and (2) the willingness to take out a reverse mortgage contract loan in the event of old-age dependency. The paper's findings suggest that homeowners' WTS in old age is unaffected by their income or housing assets and is, rather, determined by socio-environmental housing characteristics and the individual's health and personal needs. Conversely, the study finds that the uptake of home reversion loans is largely dependent on income or education, but not on a household's housing assets.

Searching for a Balance of Responsibilities: OECD Countries' Changing Elderly Assistance Policies

“…A third change is that multigenerational households have declined in industrialized countries. This is due to both rising incomes, which enable generations to live separately, and an increasing proportion of people living some distance from their parents (4,15,16,31,42).…”

Mortgage-equity release: the potential of housing wealth for future Dutch retirees

“…Once people own their dwellings outright, owner-occupiers live rent-free, and they are therefore less reliant on income from employment. A second potential role is that housing wealth can be used in line with lifecycle models of saving and consumption; it could thus be consumed in old age (Bonvalet and Ogg 2008;Chiuri and Jappelli 2010;Costa-Font et al 2010;Ong 2008;Rouwendal 2009). In theory, the optimal pattern of consumption smoothing would involve reducing housing wealth to zero in the period between retirement and the moment that one passes away.…”

“…Reverse mortgages enable older owner-occupiers to cash in part of their housing wealth while they continue to live in their dwellings. Scholars in the fields of sociology, economics and the multidisciplinary field of housing research are expressing growing interest in the significance of housing wealth in relation to retirement (Chiuri and Jappelli 2010;Costa-Font et al 2010;Doling and Horsewood 2003;Elsinga et al 2007;Kemeny 2005;Malpass 2008;Ronald 2008;Rouwendal 2009;Van Gent 2010;Venti and Wise 2001).…”

Economic Well-being and Ageing: The Need for Financial Education for Social Workers

“…It has been suggested that by 2011 around 73% of households whose heads are aged 60 and over will own their own homes (Forrest et al, 1997). Home-ownership and housing equity is increasingly being seen as offering a financial safety net for individual households (Groves et al, 2007), and one that offers a key self-insurance device (Costa-Font et al, 2010).…”