The U.S. population over the age of 65 is currently 50 million people and by 2030, it will increase to 70 million.
Does this mean a housing crisis for Boomers is inevitable?
Income for those over 65 will fall dramatically, because unlike the current generation of retirees, Baby Boomers, those born between 1946 – 1964, do not have the same level of savings or pension benefits, and rental rates and housing costs will continue to outpace inflation. This will create a huge gap between income and housing costs for those in retirement.
Here are the Stats
According to the most recent Census data, annual income for those aged 65 – 74 is $47,000. The income comes from social security, pension plans, interest and withdrawals from retirement savings. Census data shows these people spend approximately 34% of income on housing, or approximately $1,332 per month. According to RentRange and Real Property Management East San Gabriel Valleys data, the national average rent for a three bedroom single family home is $1,320. The balance between income, housing costs, and average rents is in balance.
However, after the age of 74, Census data shows that average income drops to $32,500. These citizens spend 38% of income on housing, or $1,029.00 per month. For these people, the average single family residence is not affordable.
Meantime, housing costs are growing. During the past 20 years, housing costs increased an average of 2.4% per year. By 2030, the average rent for a three bedroom single family residence will be $1,830 – more than the entire monthly income retirees will earn.
What Could Happen?
The implications are profound. Most retirees will be forced to continue working well into retirement to supplement income. Fewer and fewer will be able to afford living alone. A greater portion of income will need to be spent on housing. Cohabitation and shared housing will become the norm – perhaps similar to how college students live today. Dormitories for the elderly might sprout up. The children of these retirees will either have parents and relatives live with them, or subsidize the housing and living expenses. And calls for government assistance will grow at a time when social security coffers are expected to be stretched to the limit.
With this looming crisis clear, what is to be done? First, Boomers need to understand how much savings they will need in retirement, and start building a significantly larger retirement fund. Second, their children should start planning now for the housing and living needs of their parents. Government needs to act now to address the coming crisis. And the housing industry needs to rethink the types of housing that will be needed during the next twenty years.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.