We've covered senior housing as an investment opportunity at Millionacres. And with the octogenarian population in the U.S. on track to double over the next two decades, it's a good one. But for many people, this isn't just an investment trend or an interesting socioeconomic trend. It's the biggest dilemma they currently face as a family.
While a good amount of 80-somethings will wind up in senior housing/assisted living, that is not the ideal outcome for those who still have younger family and decent health. Whenever feasible, the first choice for many elderly people is to move in with family. Multiple generations of family living under one roof is hardly a new concept, although some cultures gravitate toward it more than others.
The "in-law unit" and garage apartment are not unusual single-family home features, although in many cases people use them for rental income rather than to actually house Granny. But investors and homebuilders like Lennar (NYSE: LEN) are putting major resources toward the multigenerational trend in single-family housing.
Will your next home contain permanent rooms for an aging parent, or possibly multiple parents? It's a heavy question, with many other questions attached. For those of you who are currently thinking about it, or putting it off but know you'll have to decide at some point, here's a look at how the silver tsunami is on track to affect housing.
The broad view
There are several studies and reports that point toward a big impact. As a broad trend, the U.S. is aging, seniors' needs are increasing, other generations are finding ways to accommodate them, and if they aren't yet, they will be.
- According to research from Harvard University's Joint Center for Housing Studies, the number of households headed by baby boomers age 65 to 74 grew to more than 17 million from 2011 to 2016 -- a 26% increase. The number of head-of-households 80 or older increased by 71% during this period.
- According to an AARP Public Policy Institute report from 2018, while the "average" caregiver is white, female, and late 40s, 25% of unpaid adult caregivers fall within the millennial demographic. Of the millennial caregivers, 47% are men. Of Gen Xers, 39% are men. In other words, the mentally and financially challenging work of caregiving is becoming a family responsibility.
- According to Pew Research Center, 14% of "extra adults" (i.e., adults not in the nuclear family but living in the house) are parents of the head-of-household. And this percentage is growing.
- And finally, according to the National Association of Realtors, 12% of multigenerational home purchases were made with the intention of moving in aging parents.
Research by John Burns Real Estate Consulting suggests that more than 40% of Americans buying a home are shopping with older relatives in mind.
The potential positives of buying a multigenerational home
Freddie Mac (the Federal Home Loan Mortgage Corporation) has been aware of the increase in multigenerational households for a few years now. As this report from 2018 shows, the government-sponsored enterprise (GSE), which ultimately buys a huge percentage of mortgages, is actively encouraging lenders to look for qualified first-time homebuyers who fit the multigenerational profile -- with a nod to the Hispanic households that have traditionally lived this way, but also opening up to other niche demographics like those where the head of household is self-employed.
Freddie Mac products tailored to enable the purchase of multigenerational homes include:
- Home Possible Mortgages, with down payments as low as 3%.
- Simplified underwriting for self-employed heads-of-household through automated income calculation with LoanBeam.
Meanwhile, Fannie Mae offers HomeReady, which allows buyers to include supplemental income from extra adults living in the home and accepts gifts for up to 100% of the down payment and closing funds. This product can work out well for multigenerational families where the aging parents have some funds to contribute and are moving in due to a desire for closeness to family, not just out of financial necessity.
The question many families are grappling with is How far do we go to accommodate aging parents' needs? Besides just allocating an extra bedroom and bathroom, what are the additional considerations? For example:
- Will your parent/s be more comfortable and confident if they have full living quarters, including a kitchenette and sitting area?
- Will the additional suite need to be on the ground floor for parents with limited mobility?
- Will it need to be wheelchair- or walker-accessible?
- Will you need an additional parking spot, if your parents are able to drive?
- Will you need to choose a home within walking distance of retail and senior-appropriate recreation?
- Will you need additional security features to protect aging parents who may be suffering from memory loss or dementia?
- How safe and comfortable is the neighborhood, from the point of view of a parent who may be used to a completely different lifestyle and pace?
Where does the aging population go, if not with their kids?
No matter what their age or health situation, many people prize their independence -- or are just used to their routine -- and don't want to give it up. Maybe they can afford a lifestyle that suits their needs. Maybe they don't want the extra noise and domestic turbulence that comes from putting three or four generations under one roof. Maybe they need professional care. For all these reasons, senior living options continue to diversify…and rise in costs. These are the most popular:
- Active adult communities are neighborhoods for post-retirement folks who need no special ongoing care and just enjoy being around others in their demographic.
- Independent living communities provide a minimum level of services as needed but allow their residents to enjoy a mostly self-sufficient lifestyle -- although with easy access to prepared meals, home maintenance, scheduled care, and recreation.
- Assisted living residences provide hands-on caregiving up to a certain level, such as assisting some members with dressing and bathing.
- Nursing homes provide the most hands-on and specialized care -- and can be extremely expensive.
Aging and waiting -- the generational conundrum
Interestingly, the option that may contribute most to the affordable housing crisis is "aging in place" -- where seniors simply stay put in the homes they bought 40 or 50 years ago, even though they can't use the space anymore. It's the status quo, but it's a problem for millennials struggling to gain a foothold, according to Freddie Mac.
So, while moving your parents back in with you -- even taking out a mortgage together with them -- may seem like the opposite of growing up, it might actually be the best way to consolidate resources and responsibilities while preserving the family bond.