Often overlooked as developers and planners study the market demand generated by a youthful generation Y is the fact that the fastest-growing age group in the United States is the one aged 65 and older, which is predicted to increase by 120 percent by 2050, says John K. McIlwain, ULI senior resident fellow/J. Ronald Terwilliger Chair for Housing.

These aging but active baby boomers, as well as the generations before them, are creating new opportunities as well as challenges for the U.S. housing industry as it strives to meet the diverse lifestyle needs of people in various phases of their senior years, according to McIlwain, author of a new ULI publication, Housing in America: The Baby Boomers Turn 65. The report explores the housing market changes that will occur as the leading edge of the baby boom generation turns 65 and as the “silent generation” (those aged 67 to 84 years) and the “greatest generation” (those 85 and older) make housing choices. Because of the differences among those groups, “senior is not a useful term anymore,” McIlwain says.

“The combination of the leading-edge boomers reaching 65 with expectations of a longer life than [any generation has experienced] before, and the fact that many of the silent and greatest generations are running through their limited retirement savings—combined with a continuing reduction in federal and state resources for housing subsidies—is leading to a crisis in U.S. housing for those over 65,” he adds.

The world’s population aged 60-plus years is expected to reach 1.2 billion by 2025 and almost 2 billion by 2050. In the United States, the 65-plus population, which totaled approximately 40.3 million in 2010, is expected to reach 54.8 million—a 36 percent growth rate—by the end of this decade, as 40 million baby boomers turn 65.

The existence of aging baby boomers alongside other older demographic groups has created not one single market segment, but a variety of market segments, notes ­McIlwain. “Over the last two decades, unprecedented change has occurred, and today three separate generations are over 65, each with its own outlook on life and distinct housing needs that are unlike those of past markets for people in their age group.”

How They Differ

“Leading-edge boomers” are the 40 million Americans born between 1946 and 1956, part of a 74 million–person cohort born in the 18 years between 1946 and 1964. This leading edge will turn 65 over the coming decade. Americans reaching 65 today, as long as they are healthy and do not work in physically debilitating occupations, have a life expectancy exceeding 90 years. “These additional 31 years of expected life have not been just tacked on at the end,” says cultural anthropologist Mary Catherine Bateson, who is quoted in the report. “Today’s 65-year-olds are starting new careers or continuing old ones, traveling around the world, and eloping with new loves in a stage of life we are calling ‘adulthood II.’”

A majority of older Americans want to age in their current homes, even when they need assistance, according to surveys cited in the report. Other people are remaining in their homes, at least for the time being, because of the difficulty of selling them in the current housing market. However, many who are able to move are choosing urban locations—both cities and suburban “town centers”—where they can be close to grown children, friends, work, public transportation, and health care. “Leading-edge boomers will not settle gracefully into quiet retirement and move into traditional senior housing communities for years, if they ever do,” McIlwain says. “This is not a generation that is looking forward to moving back into a dormitory or other institutional setting,” he adds.

Boomers are not alone in developing an antipathy to institutional living. They share this sentiment with their parents, members of the aforementioned greatest generation, those 4.5 million people 85 years of age and older who are living longer than any prior generation. Over the next decade, most of this cohort will have significant health care needs and require an array of personal services.

While many in this generation enjoy adequate retirement savings, supportive families, or both, many others have limited financial resources and/or family support.

To preserve their retirement funds and independence, the aforementioned silent generation is shunning traditional suburban senior housing communities; as a result, the average age of new residents at these communities has risen to 84. Those older Americans unwilling to leave their suburban homes or unable to sell them are creating “naturally occurring retirement communities” that will need increasing levels of government-funded services in the years ahead.

Caught between the leading-edge boomers and their parents, the silent generation comprises 28 million Americans ranging from 67 years of age to the early 80s. With one foot planted firmly in the culture of the immediately prior generation and the other in the pioneering spirit of the boomers—”think Mick Jagger, Tina Turner, Harrison Ford,” says one industry expert—the “silents” are exploring new ideas about how and where to retire, ranging from multigenerational cohousing and affinity communities to homes in the more temperate climes of Georgia or the Carolinas over Florida.

More than half of Americans over 65 live in suburbs, notes the report. Because many people prefer to remain in their own homes as long as possible or may not be able to sell even if they wish to move, suburbs are expected to continue to see substantial growth in their over-65 populations. Naturally occurring retirement communities are on the rise in suburbia, requiring increasing levels of support. The report suggests that local governments will be increasingly pressured to provide services to those aging in place. Whether provided in seniors’ homes or at providers’ locations, services for suburban senior citizens require cars, vans, buses, and drivers. The report says to expect more suburban group homes and “virtual villages,” as well as permit modifications for age-restricted communities and group homes.

Centrally located urban neighborhoods, including those in downtown cores as well as inner-ring areas, can provide services and amenities—such as public transit, health care, pedestrian-friendly streets, arts, cultural events and facilities, ongoing education opportunities, libraries, stores, and human interaction—that appeal to older and younger residents alike. To accommodate a higher proportion of seniors, however, cities may need to make a range of infrastructure improvements such as curb cuts, benches at transit stops, access to bathrooms, slower timing of traffic lights, well-maintained sidewalks, and zoning that allows people to rent out portions of their homes.

The nation’s approximately 50,000 seniors’ housing communities, including those providing independent, assisted living, and/or full nursing care, would seem to constitute a growing market, but in reality, they are on the decline, notes the report. Since the beginning of the Great Recession, these communities have faced difficulties finding new residents to replace those who leave. This is due in part to the high cost of retirement housing and the fact that many members of the silent and greatest generations have insufficient retirement savings. However, other issues are in play, according to McIlwain. “No matter how attractive and supportive an institution is, it is still an institution,” he says. The institutional nature, suburban locations, and existing “old-old” populations of these institutions make it difficult for them to attract new residents, particularly younger ones. The ULI report suggests that existing communities be made more environmentally friendly in order to appeal to younger residents as well as to investors, while reducing operational costs.Beyond traditional seniors’ housing, leading-edge baby boomers and members of the silent generation are exploring a diverse mix of living options, creating niche markets that could become significant in size due to the large numbers of Americans over 65 years of age who wish to move. These include the following:

  • College towns, which allow seniors to live near children and grandchildren while enjoying on-campus activities;
  • Manufactured housing—an affordable option, but one that faces the challenge of locating approved sites in established areas;
  • Cohousing and group living, a niche that must be multigenerational to maintain mutual support as residents age;
  • Multigenerational living, which is rising in popularity at a rate faster than that of overall household growth, but nonetheless is difficult to implement in urban areas dominated by apartment living; and
  • Affinity retirement communities, which bring together people who share interests ranging from sports to gardening to culture. The number of retirement communities targeting specific university alumni, for example, has doubled over the last ten years.

McIlwain points to a likely tug-of-war between the housing needs of younger and older generations in the years ahead as generation Y, numbering 80 million, enters the housing market in force. “Stretched as they are financially, the over-65 population is better off than generation Y, which faces the worst financial future since the Great Depression while anticipating the burden of caring for all three of the 65-plus generations,” he says. “How federal and state funding will be divided among generations in an era of diminished federal resources will be a dominant political and policy struggle of the coming decade and beyond.”