Emily* loved her new 4,000-square-foot home in the Rocky Mountains, which was surrounded by aspens and close to her daughter and grandchildren. But when her husband developed health problems and couldn’t drive anymore, she felt isolated, even from the grocery store.
“One day we decided that there are a lot of things we can’t control about our lives, but we could control where we lived,” she says.
After evaluating their finances and needs, Emily and her husband, both in their mid-70s, chose to sell their house and become renters. They found an apartment in a nearby city, a place within walking distance of a grocery store, the ballet and symphony, public transportation, a dentist, bank, and barbershop.
Everything felt easier, from opening the door to get the newspaper—instead of trekking to the end of a snowy driveway to retrieve it—to not worrying about yard work or maintenance. After Emily’s husband passed away, those conveniences mattered even more.
“I have zero responsibility here,” she says.
Emily joins a growing number of older Americans—age 65 and up—who are selling their homes so they can rent. While it’s not unusual for retirees to downsize and buy a smaller place, renting hasn’t been as common.
In 2010, 13.47% of renter-occupied households were made up of people 65 years of age or older. In 2015, that percentage rose to 14.57%, more than 6 million people. (source: American Community Survey).
Where and how aging Americans choose to live will have a greater impact on the real estate industry. That’s because in 2014, Americans age 65 and older accounted for 46.2 million Americans, or 14.5% of the U.S. population, about one in every seven Americans. By 2040, they’ll make up 21.7% of the population.
Reevaluating the American dream
While some aging Americans keep their homes and rent them out to younger generations, others want less responsibility and decreased financial risk.
Or they’ve faced the possibility they won’t make any financial gains from owning a home. “I’m not going to live long enough to get any benefit from keeping a house to sell it,” Emily says.
Mike and Teri Van Hoet, aged 69 and 65 respectively, participated in the American dream of home ownership by buying a 3-bedroom, 2.5-bathroom house in a suburb of Kansas City decades ago.
When the economic downturn depleted their investment funds, much of which was tied up in real estate investment trusts, they were forced to reevaluate their finances, including their house.
“I understand the concept,” Teri says. “When you’re young, invest in real estate, then the real estate appreciates. But at some point, unless you have two incomes, maintenance starts eating up the equity in home.”
When Mike was diagnosed with a heart condition and couldn’t do yard work or house maintenance, they decided to take advantage of the seller’s market in their neighborhood and sell. But then what?
They considered buying a condo, but the HOA costs seemed prohibitive. “Why would we put that much money into something we may need to sell again?” Teri says.
So they decided to rent a 2-bedroom, 2-bathroom apartment with ample storage and a parking spot. They sold most of their furniture and bought new pieces that would fit the space.
Mike says they don’t know anyone else their age who rents. “We’re pioneers,” he says.
Real estate opportunity
Daniel Soliman, the director of housing impact for the AARP Foundation, says geography factors into many seniors’ decisions about renting or owning. The group offers a calculator to help seniors make informed decisions.
“It’s challenging for older adults, especially those who may own outright, to have rental payments that are substantially more than the mortgage on their house,” he explains. That makes rent prices in the country’s hottest real estate markets, including San Francisco, New York City, Boston, and Washington, D.C., nothing less than prohibitive.
For the most part, the AARP Foundation helps seniors who struggle to find affordable rental housing. Even so, the group encourages home ownership, even for first-time home buyers over the age of 50.
But renting provides an “easier way of life” for some seniors, Soliman says, especially for those who anticipate needing in-home care in the future. That’s when they might choose different levels of assisted living.
As a former real estate investor, Soliman says he sees a huge opportunity for the builders of residential rental properties.
When he and his brother were looking for a place for their elderly mother to live, Soliman learned about the principles of “universal design,” which caters to older populations with features like wider hallways and doors, lever handles, and panel switches.
If more builders implemented those concepts, which Soliman says also benefit other age groups, they could market to a larger audience of renters. “Sometimes the real estate industry takes longer to realize things,” he says.
Seventy-four-year-old Knial Iorg had doubts about renting. But when he retired and got divorced, he felt overwhelmed by the responsibilities that came with his log-and-rock house on 17 forested acres in Ozark, Missouri. And he felt isolated. He had to drive a long way to visit family and attend softball games.
He rented a duplex, the first place he’d ever rented. “Next thing you know, my first year was up, and I’d already planted a lot of flowers,” he says. Eleven years later, he still lives in the same duplex, and he negotiated his rent so he only pays $25 more a month than he did when he started renting.
His neighbors are in their 50s. They bake cookies for him and pick up his mail when he’s out of town.
“All my life I’ve been told you need to own your own home and build that equity,” he says. “But that’s not important to me now.”
What older renters look for in a rental
In general, older renters want accessibility and ease of living. They appreciate these features in a rental:
- Covered parking, especially in snowy climates
- Alarm system or some type of security
- In-home accessible design features
- Single-floor living
- Proximity to grocery stores and public transportation
- High walkability score
- Sense of community
*Name changed to protect privacy.