The elderly are most vulnerable
This post draws on interactive data on income and housing affordability, provided as a resource for California legislators and the public.
The elderly can easily be portrayed as the enviable villains in California’s housing saga. They bought their homes decades ago when they were still affordable, and today they pay disproportionately low property taxes and spend their time fighting new housing, while remaining stubbornly oblivious to the young who are hopelessly slaving away to pay rent.
But as with any caricature that portrayal is unfair. Although there is some truth to it, many older Californians are in fact particularly vulnerable to soaring housing costs.
Let’s start with the income snapshot. In data spanning 2015 through 2019, people 65 and older had the lowest median household income of any age group in California..
Among those aged 65 to 74, some of whom may still be working, the median household income was $73,000, well below the state median of $81,000. For those 75 and older the figure was only $55,000. The income gap between these Californians and those aged 45 to 54 was starker than even the gap between Blacks and Whites.
Median Household Income by Age Group: California (2015-2019 average)
The elderly have always been in a financially precarious position. With their earning years behind them, older Californians have fewer options than other age groups for making more money. And while moving might be an alternative for some graying residents, for many others advanced age can be a roadblock to finding cheaper housing.
Declining health makes relocating difficult, and downsizing can take a profound emotional toll. A move for any reason, but especially one made under duress, can lead to anxiety, hopelessness, and loneliness, a collection of symptoms some experts call transfer trauma. Moving long-distance to a cheaper part of the country can be especially difficult for the elderly.
Into this mix comes an increasingly common phenomenon, the mortgage- and rent-burdened retiree. The conventional wisdom that most seniors enjoy homes free and clear of monthly payments is false.
In 2000, 37 percent of state residents aged 65 to 74 owned their homes outright. In the years just before the pandemic, 2015-2019 that number had fallen to just 30 percent. Among people 75 and older, the share of debt-free homeowners fell from 49 percent in 2000 to 42 percent.
Population Share by Housing Tenure: California (2000 vs 2015-2019 average)
Meanwhile, the share of renters among California residents aged 65 and older has grown, reaching 25 percent in 2015-2019. The share of those residents who owned their homes with a mortgage also has grown over that period.
What’s driving the trend? First of all, today’s seniors bought their homes a couple of decades after those who populated the same age groups in 2000. Even if the ramp up of housing prices in the 1970s, ‘80s and ‘90s seems quaint in hindsight, they prevented some people from ever becoming homeowners and they delayed others from starting their mortgage clocks.
The housing collapse that began in 2008 also took its toll. Foreclosures and distressed sales turned many one-time homeowners into renters. By the time property values rebounded, some of those renters were priced out of ownership for good. And others who lost homes during the foreclosure crisis did recover, but had to start over. They took on new mortgages at later ages, which means paying off those mortgages later, too.
For people who held onto their homes, low interest rates and the corresponding refinancing waves extended the life of their loans. The cheap borrowing made for lower payments, but those refis typically reset the clock on 20- and 30-year mortgages that are still being paid off.
Finally, as property values soared, older homeowners tapped their equity with frequency, taking out reverse mortgages or cash-out loans to finance the college tuition–or fund the downpayment on a child’s home purchase.
Seniors who rent are the most vulnerable. The 1 in 4 elderly Californians who rent are caught in the vise of their fixed, lower incomes and rising rents, and are likely spending a larger share of their incomes on shelter than they would have before. Unlike younger residents who can more readily adapt to higher rents, even if that means moving, the elderly often cannot.
What about the seniors who own their homes? Those with a mortgage most often have a monthly cost which is predictable, and all of them have predictable property taxes thanks to California’s infamous Proposition 13 and its extensions. While that 44-year-old legislation has hurt California terribly, it does protect the elderly from housing price shocks to which many of them would be unable to adapt.
Now, California’s elderly population is set to explode. The number of retirees is forecast to grow more than three times faster than the overall population, and the number of residents older than 85 will grow more than four fold by 2060, according to the California Department of Aging.
That means that our treatment of the elderly will only grow more important. As much as California’s YIMBY’s disdain Proposition 13 and its limits on property taxes, the law has protected the state’s elderly. While tax reform addressing that law and its extensions is sorely needed and long overdue, the risk that California’s home prices will continue rising as they have been requires that any new policy must take into consideration its implications for the vulnerable elderly. After all, a civilization is judged by the way it cares for its helpless.