The retirement impact on housing cost burden: are homeowners better off than tenants after retirement?

Abstract

Existing research on housing cost burden focuses on its evolution over time. Few empirical studies, meanwhile, investigate changes in housing cost burden as a function of age. Literature is also scarce on how people's housing cost burden is affected by the act of retiring. In order to fill this research gap, we examine how the burden of housing costs tends to change after retirement and how the impact of retirement on housing cost burden differs for tenants as compared to homeowners. Taking advantage of the longitudinal data provided by the German Socio-Economic Panel (1993–2019), we estimate fixed effects regressions and model impact functions to estimate how people's housing cost burdens change after they retire. In addition, we interact the retirement event with tenure status. Our results show that retirement is associated with an increase in housing cost burden and that this association is stronger among tenants than among homeowners. We contribute to the literature on housing cost burden by taking a longitudinal perspective and showing that critical life events such as retirement do have an impact on the financial pressures exerted on households by housing costs and can even exacerbate the existing inequality in terms of housing cost burden between tenants and homeowners. We also demonstrate the importance for policy makers and future research of identifying social groups that may be particularly prone to financial overburden as a result of elevated housing costs in old age in order to implement policies that avoid such overburden and prevent the increase in social inequality after retirement.