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Age-Qualified Adult Housing Has Some Growing Up to Do
The aging of the baby boomers and the rising share of the U.S. population comprised of people who are 55 or older suggest room for significant growth in age-qualified active adult housing, but so far that segment of the marketplace hasn’t reached its potential, according to a special study by NAHB housing analysts Paul Emrath and Helen Fei Liu.
Out of the 69 million owner-occupied housing units in the country, age-qualified active adult housing — communities that generally require residents to be 55 or older, based on the provisions of the 1995 Housing for Older Persons Act — accounts for just under one million, about a 1.4% share.
In sharp contrast, the NAHB researchers found that most 55+ households live in other communities.
Data available from the 2005 American Housing Survey (AHS) show that there are 21.6 million 55+ home owners who are living in ordinary communities, about a 31.2% share of the total owner-occupied housing units. And there were seven million 55+ households who reported that their neighbors are mostly their age but that the neighborhood is not explicitly age-qualified, accounting for 10% of the units.
In addition, the report says, age-qualified active adult homes are not evenly distributed across the country or within localities. Compared to the other communities where 55+ home owners are living, a disproportionate share of age-qualified active adult homes are in the South Census region and fewer are in the Midwest. Nearly one-half of the households in these homes are in the South, compared to only 7.5% in the Midwest. “Possible explanations for this pattern include population density, climate and the price of homes,” according to the study.
The AHS also shows that 71% of age-qualified adult homes are in the suburbs; only 14.3% of them are in the central city.
Capturing Only One-Third of Potential Customers
Looking at today’s home buying market, the analysts conclude that “55+ communities are capturing only about one-third of their potential customers — and again, most of these are in communities that are not age-qualified.”
Applying the AHS percentages of market shares to NAHB’s housing forecast, the economists estimated that housing units sold to or occupied by 55+ households will account for more than 370,000 housing starts this year, about 263,000 of these single-family. The estimates also show that 55+ customers should account for more than 190,000 of the projected new single-family sales and more than 800,000 of the projected existing single-family home sales in 2007.
New housing built in age-qualified active adult communities in 2007 will have an estimated value of $7.3 billion, based on the average values of the new units from the 2005 AHS.
“In one sense, the estimate of $7.3 billion represents a substantial number,” the report says. “However, it’s relatively small compared to the $74.1 billion of new housing purchased by 55+ households that is neither in an age-qualified community nor in a community that is occupied primarily by 55+ households. This is a further indication that age-qualified active adult construction is still capturing a relatively small share of the maximum potential number of customers.”
According to the U.S. Census Bureau, the number of Americans who are 55 or older increased from 52.2 million, or 21.0% of the total population, in 1990; to 59.3 million, 21%, in 2000; to 67.0 million, 22.6%, in 2005.
Based on NAHB’s forecast, the 55+ population will grow to 76.6 million, a 24.5% share of the population, in 2010; to 85.6 million, 26.3%, in 2014.
Higher-Quality Homes Wanted
As a result of NAHB working with the Department of Housing and Urban Development and the Census Bureau to improve the quality of the data they collect on 55+ housing markets in the AHS, which is conducted in odd-numbered years, the researchers were also able to find some information on the reasons that 55+ households moved:
- Nearly 20% of the recent movers who chose age-qualified active adult housing reported that they wanted higher-quality housing units, compared to under 15% of those 55+ households who moved into either unrestricted but predominantly 55+ communities or communities with no particular age dominating.
- Only 1.5% of the households moving into age-qualified active adult homes reported moving because they wanted larger housing units, compared to about 10% for households moving into other 55+ communities.
Among the reasons that 55+ buyers of age-qualified active adult homes chose a specific community:
- A full 45.0% of those surveyed said they liked the design and looks of the community.
- Almost 25% cited the proximity of the community to friends and relatives.
- More than 22% said the community was close to leisure activities; this response for choosing a community was cited by only 6.9% of those living in non-55+ communities.
While suggesting approaches for builders and developers to improve the popularity of age-qualified homes for active adults, the AHS only listed a limited number of possible responses to these questions, which resulted in 58.6% of the respondents in age-qualified housing identifying “other reasons” for moving and 23.1% of them citing other unspecified reasons for choosing a community.
Location of Health Care Facilities
A 2003 collaborative study by NAHB and AARP may suggest additional reasons for elderly households moving or choosing a community that were not captured by the AHS.
“The survey asked respondents if particular community features would be important to them in their later years, and whether they currently have these features,” the authors said. “The results show that a hospital, doctor’s office or drug store is important to over 80% of 50+ households.”
“Moreover,” they said, “there is a gap of at least 20 percentage points between these percentages and the share of 50+ households reporting that they actually have these health-related facilities in their communities. This suggests that there may be market opportunities for developers to located age-qualified communities within range of healthcare facilities.”
Other findings from a review of the AHS data:
- Many new home buyers age 55 or older are moving out of an owner-occupied, single-family home. “This is especially true among new home buyers in age-qualified adult communities, where the share of previous single-family home owners approaches 100%.”
- Buyers who are 55 or older are more likely to buy new homes: total 55+ households account for 18% of the home buying market, but about 21% of the market for new homes.
- Older new home buyers have a somewhat greater tendency to buy new custom homes, with 55+ households accounting for more than 24% of that market.
For more information, e-mail Paul Emrath at NAHB, or call him at 800-368-5242 x8449; or contact Helen Fei Liu, x8697.
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