Baby boomers are facing a housing crisis, perhaps the most severe to hit this demographic in recent history. However, its impact will be felt not just by boomers, but by the entire country, predicts Andrew L. Erkes, Cambridge Realty Capital President.
With the baby boom generation beginning to enter retirement years, economists and other experts cite several potential crises afflicting the senior population, all stemming from a disturbing nationwide shortage of affordable housing. Problems range from baby boomers being forced to work well past traditional retirement years to having to choose between paying for healthcare-related expenses or paying for groceries.
According to an article by Bill Roth of TriplePundit.com, a majority of seniors have failed to save enough money to get them through their retirement years. However, it’s not for lack of trying. The average senior has approximately $136,000 in retirement savings. The problem is that rising prices in all areas (not just housing) have outpaced the working baby boomer’s ability to save. Had today’s 65-year-old hit 65 even a decade ago, his financial picture would have looked less uncertain.
For those unfortunate enough to be part of the 25% of baby boomers who haven’t been able to save any money at all, the outlook is even more grim. Many have no choice but to continue working. Forty years ago, the median age of the average US worker was 35. Today that number has risen to 42, according to the US Department of Labor.
Additionally, according to the Population Reference Bureau, by 2030, 23% of the US labor force is projected to be 55 or older. Compare that to the year 2000, when just 13% of US workers were 55+.
Aptly referred to by the media as the “Silver Tsunami,” the tidal wave of baby boomers reaching retirement age is, as yet, still in its early stages. As the wave continues, it will continue to rise to its peak. The peak of the Silver Tsunami, when the most significant number of baby boomers reach age 65, is projected to hit in approximately ten years.
“That’s when we will feel the biggest impact,” says Erkes, adding that the impact will have a ripple effect that won’t be limited strictly to the baby boomer generation. It will affect the family members of seniors, and it will, in one way or another, hit every sector of business and industry.
Although there are no studies to back it up, anecdotal evidence and conventional wisdom suggests that many people look to downsize during their senior years. For some, this means moving from a large home to a smaller one or an apartment, or into seniors-only housing of some type.
Josh Lehner, Senior Economist with the Oregon Office of Economic Analysis and author of a recent report on the coming needs of baby boomers, speculates that millions of baby boomers will be trying to downsize as the Silver Tsunami peaks. Not only will there be too little affordable housing available for them, the increased competition for smaller living quarters will drive up the prices of existing homes and rental spaces, putting them even further out of reach for cash-strapped seniors.
Though it’s tempting to blame the government, in reality, the problem is systemic. It will likely require the cooperation of a variety of sectors and individuals, both public and private, to come up with a solution.
“The affordability question is real,” Erkes contends. “The senior living industry can provide housing and other services on a location-by-location basis, but overall, this crisis that is forthcoming will be much bigger than just the senior living industry alone.”