Woman packing boxes to move home
VoxEU Column Health Economics

Housing in old age and the effect of a health shock

‘Ageing in place’ refers to individuals’ preference to remain in their homes as they age. However, the suitability of one’s home in old age can change with exposure to health shocks. This column shows that, in Europe, whilst ageing decreases the probability of residential change, health shocks revert such effects. Policy interventions could help older people who wish to downsize by making it easier to search for housing.

Economists tend to view people’s homes as an investment or a means of obtaining housing services (Costa-Font 2013). Homes also have an emotional and symbolic significance that gives residents a sense of security, comfort, community, and even personal success (Faulkner and Bennet 2002). Therefore, ‘some ageing in place’ refers to a person’s expectation to live in their own house (or that of their spouse or partner) until special circumstances demand otherwise.

People’s assessments of how suitable their home is for them as they age are often based on independent living situations, which are seen as the standard (status quo). As a result, people may overlook certain aspects that are only important when people age. Moving away from the standard is perceived as a loss, which gives rise to “inertial preferences for not changing residence”. Similarly, a preference for ageing in place might suggest that individuals are present-biased with regard to their housing needs.

Irrespective of its behavioural explanations, ageing in place can enhance health by giving people a feeling of community and autonomy (Grabowski 2006). While ageing in place is largely uniform across nations, it is unclear what motivates people to relocate and, more especially, how individual preferences shift in reaction to unforeseen circumstances – such as health shocks – that impact how suitable a place is for them to live.

Ageing in place is possible when there are neighbourhood support systems, suitable housing, and unpaid and communal care. Additionally, ageing in place is strengthened as housing assets are the main source of wealth, and hence exert a large financial influence on household finances (Venti and Wise 2004), especially where rising house prices give rise to significant inequality (Fitzenberger et al. 2018). As some have shown (Paz-Pardo 2022), young households cannot or prefer not to risk making large illiquid investments.

Housing downsizing in old age

While some studies find that the preference for ageing in place prevails even when individuals exhibit deteriorating health and need personal care (Judd et al. 2010), Angelini et al. (2011) document that Europeans tend to downsize later in life by selling an expensive home and buying a cheaper one. However, it is important to distinguish physical downsizing from financial downsizing. Physical downsizing denotes a residential change to a dwelling with a lower number of rooms, whereas financial downsizing refers to the change to a dwelling of lower value.

Such housing mobility decisions are explained by a housing imbalance, the life-cycle model, as well as bequest motives.

  • Housing imbalance: Older households use more housing than they actually require. Housing consumption rises with age, peaking in the ‘empty nester’ stage of 60–69 years, when most households overuse their housing services, especially single homeowners and those in higher income brackets (Clark and Deurloo 2006). Such excessive housing consumption clogs the housing market, preventing younger households from accessing larger homes.
  • Life-cycle effects: People expect to use accumulated assets to support themselves in old age. Given that housing assets are the largest share of people’s wealth, older people are likely to downsize or rent to release some wealth for other purposes.
  • Other life-cycle explanations: These include bequest and empty-nest motives.

Health shocks change housing preferences

An alternative explanation for downsizing is the effect of health shocks. We investigate whether people downsize to both smaller size (physical downsizing) and value (financing downsizing) after a health shock, including whether such a move encompasses a reduction in people’s housing assets to free up wealth for other purposes (Costa-Font and Vilaplana 2022). We study the effect of a health shock to the respondent or their spouse on three measures of housing downsizing: residential mobility, the value of a new residence (measured as the home value of the new dwelling and the home-value-to-wealth ratio) and, the individual’s home size, considering the potential endogeneity of both health shocks as well as residential mobility.

Drawing on the five waves of the Survey of Health, Ageing, and Retirement in Europe following individuals in nine countries for about a decade, we document that, consistent with the ageing-in-place hypothesis, age reduces the probability of residential mobility by 2 percentage points for every decade of life. However, this probability reduction from age effects reverts after a health shock. That is, ageing in place is contingent on the absence of a health shock in the household, and such an effect is also observed when the health shock affects the spouse or partner.

Forward-looking individuals can prevent housing downsizing, as residential mobility to a smaller dwelling is less likely to take place when individuals live in a house where home adaptations have already taken place.

Furthermore, in examining financial downsizing, we find that the home-value-to-wealth ratio falls by 8.9 percentage points after the onset of a degenerative mental disorder and 4.2 percentage points after a non-mental illness. In these cases, the new home has 0.6 and 1.2 fewer rooms, respectively.

Finally, we find significant country heterogeneity. Individuals in Nordic countries meet all of the downsizing definitions examined, whereas those in southern European countries tend to move to smaller, but higher-value residences, mainly driven by investment (or bequest motive) reasons.

Policy implications

Ageing reduces the likelihood of moving, and ageing in place is still a fundamental behavioural feature in explaining housing mobility in old-age Europe. Nevertheless, health shocks reverse these effects. The chance of residential mobility increases with the beginning of degenerative mental disorders or new limits in performing daily living activities, and this effect increases with age. Hence, the degree to which ageing-in-place preferences exist is contingent upon an individual’s or their partner’s health. Additionally, the results vary greatly throughout European nations, indicating that ageing in place may be more deeply ingrained in southern Europe.

These results carry relevant policy implications and suggest that in settings where individuals exhibit strong ageing-in-place preferences even after a health shock (Costa-Font et al. 2009), policy interventions should strengthen the existing links with both physical and social environments that promote older person’s wellbeing, including existing support networks developed throughout their lives. In contrast, when individuals hold a strong preference to downsize after a health shock, policy interventions should focus on supporting their housing search, to avoid or delay entry into more costly forms of residential or hospital care, and to better manage physical and mental decline.

Finally, a knock-on effect of getting older age individuals to downsize includes the wider economic benefits of ‘freeing up’ larger dwellings owned or rented by older households, thus serving other urban policy goals. Providing more housing choices for seniors can be a public policy that, combined with fiscal incentives for individuals to downsize, can help younger individuals access homes in large and crowded cities.


Angelini, V, A Brugiavini, and G Weber (2011), Does downsizing of housing equity alleviate financial distress in old age?, Springer Berlin Heidelberg.

Clark, W A, and M C Deurloo (2006), “Aging in place and housing over-consumption”, Journal of Housing and the Built Environment 21: 257–70.

Costa-Font, J, D Elvira, and O Mascarilla-Miró (2009), “Ageing in place? Exploring elderly people’s housing preferences in Spain”, Urban Studies 46(2): 295–316.

Costa-Font, J (2013), “Housing-related well-being in older people: The impact of environmental and financial influences”, Urban Studies 50(4): 657–73.

Costa-Font, J, and C Vilaplana-Prieto (2022), “Health shocks and housing downsizing: How persistent is ‘ageing in place’?”, Journal of Economic Behavior and Organization 204: 490–508.

Faulkner, D and K Bennet (2001), Linkages between housing assistance, residential (re)location, and use of community health and social care by old-old adults: Shelter and non-shelter implications for housing policy development, Australian Housing and Urban Research Institute.

Fitzenberger, B, M Zimmermann, and C Dustmann (2018), “Housing expenditures and income inequality: Shifts in housing costs exacerbated the rise in income inequality”, VoxEU.org, 22 October.

Grabowski, D C (2006), “The cost-effectiveness of noninstitutional long-term care services: Review and synthesis of the most recent evidence”, Medical Care Research and Review 63(1): 3–28.

Judd, B, D Olsberg, J Quinn, L Groenhart, and O Demirbilek (2010), “How well do older Australians utilise their homes”, AHURI Research and Policy Bulletin 126.

Paz-Pardo, G (2022), “Younger generations and the lost dream of home ownership”, VoxEU.org, 26 February.

Venti, S F, and D A Wise (2004), “Aging and housing equity: Another look”, in Perspectives on the Economics of Aging, University of Chicago Press.