Much of the conversation regarding affordable rental housing tends to focus on younger households – in particular, Millennials. However recent findings from our first Freddie Mac 55+ Survey suggest that shifting housing choices by the Baby Boomers and those older may significantly exacerbate the already acute shortage of affordable housing in the years to come.
Through our recent survey of nearly 6,000 55+ homeowners and renters conducted by GfK on behalf of Freddie Mac, we learned that an estimated 6 million homeowners and nearly as many renters prefer to move again and rent at some point. Of those homeowners and renters that expect to move again, over 5 million indicate they are likely to rent by 2020.
We believe these numbers may be understated as both homeowners and renters tend to overestimate their ability to age in place. For example, among those not retired, 56 percent of homeowners and 34 percent of renters predict they will age in place in retirement. However, of those already retired, only 12 percent of homeowners and 7 percent of renters are currently aging in place.
This is just another indication of the growing pressure on already tight rental inventories and the significant challenges to housing affordability in the coming years. While estimates vary, we can expect a shortage of needed affordable rental units that will run into the millions. As such, the affordability gap will spread much wider than it is today.
Success will require constant innovation and collaboration by developers, lenders, investors and finance providers like Freddie Mac to track, understand, and meet the housing challenges the nation's Baby Boomers present.
When we asked renters 55 or older to predict their future housing situations, sizable percentages say:
They value affordability in the decision to move. Sixty percent of 55+ renters cite affordability as "very important" in deciding whether to move and where to live. This is not surprising when nearly half of the current 55+ renter population is struggling financially. Specifically, 47 percent of 55+ renters live payday to payday and 13 percent say they sometimes can't afford basics like food and housing, until their next paycheck.
They plan to rent versus buying their next home. Among those 55+ renters who plan to move again, 71 percent plan to rent their next home. Some of these households are making a renter-by-choice decision as 38 percent of all 55+ respondents say they have enough extra money to go beyond each payday including for savings. Further, more than half (59 percent) think it makes financial sense for people their age to be renters. This view is held by 67 percent of multifamily renters.
They don't want to move far. Ideally, 55+ renters who plan to move again would like to relocate to a different neighborhood in the same city (31 percent) or a different property in the same neighborhood (23 percent) compared to those who would like to move to a different city (18 percent) or a different state (24 percent).
They want family near (or in) their next home. When asked to predict their retirement housing situation, nearly six out of 10 55+ renters say they prefer to either move closer to their families or in with them. Hispanic single-family renters (44 percent) were most likely to predict they will move closer to family, while multifamily Asian-American renters (40 percent) were most likely to predict they will move in with their children.
Altogether, the Freddie Mac 55+ Survey findings underscore the importance of Freddie Mac Multifamily's commitment to expand access to finance for affordable rental housing.
Currently, about 90 percent of the rental units we finance are affordable to low- and moderate-income renters. Importantly, we provide this financing through innovative structures that transfer the vast majority of the risk from taxpayers to private investors.
Freddie Mac Multifamily is firmly committed to providing the continuous capital, innovation, and leadership needed to help support an evolving housing market and to address the challenges presented in the Freddie Mac 55+ Survey.