Relocating? Not so Fast, Here are 6 Reasons that May Stop you

Moving in retirement can be an attractive option for many retirees who are looking for a change of scenery, a more affordable cost of living, or a better quality of life. However, it’s important for retirees to carefully consider the financial and logistical implications of moving, particularly if they are on a fixed income.

According to a 2020 report by Harvard University’s Joint Center for Housing Studies, 76% of households headed by individuals aged 65 or older own their homes, and 49% of them have fully paid off their mortgages.

The affordable housing crisis has particularly affected middle-class adults who are nearing or in retirement. These individuals often find themselves trapped in their homes for various reasons, such as economic constraints, limited housing options, and difficulty buying or renting a new home.

Here are the issues facing middle-income retirees who wish to move:

#1 Property Taxes

Middle-income retirees may also find themselves trapped in their homes and unable to move due to taxes. Property taxes, in particular, can be a significant financial burden for retirees on a fixed income. As property values rise, property taxes can increase, making it difficult for retirees to move as their new home may carry a more significant tax burden. Even downsizing can leave a retiree paying more property taxes than they were in their old house. 

It can be challenging to manage in regions with high property taxes, specifically in certain parts of California, Texas, Florida, and the Northeast.

#2 Capital Gains Tax

Many retirees may hesitate to sell their homes due to capital gains taxes. When selling a home, any profit from the sale is subject to capital gains tax, which can be significant. Retirees who have lived in their homes for a long time may have significant equity built up, which means they could potentially owe a substantial amount in capital gains taxes if they sell their homes. This can significantly deter moving, even if retirees prefer to live in a different location. Selling a home has the potential to change your tax bracket and could affect benefits. 

#3 Scarcity of Available Homes

Scarcity has worsened the problem of finding affordable homes for sale or rent in the US. Per the National Low Income Housing Coalition, only 7.2 million such homes were available in 2021, which has made the situation even more challenging. This means that competition for affordable housing is high, and many retirees struggle to secure decent housing.

One of the main reasons there aren’t many housing choices for middle-income older adults is that developers don’t have much motivation to build for that group. Due to the expensive construction costs, it’s difficult for builders to profit.

#4 Expenses associated with an area

Retirees often struggle with the expensive cost of living, especially regarding housing. The Bureau of Labor Statistics reported that housing expenses were the biggest portion of household expenses in 2019, with an average of 33% of income going toward housing. This can be a major financial challenge for retirees with fixed incomes. As a result, many retirees find it difficult to afford housing in expensive areas like major cities, and they must seek more affordable options in less desirable neighborhoods or suburbs.

#5 Limited options

Another significant factor contributing to the affordable housing crisis for middle-class retirees is limited housing options. As they age, many individuals require specialized housing that meets their unique needs, such as accessibility features, medical equipment, and transportation options. However, there are limited options available that cater to these needs, particularly in areas with high housing costs. This means these retirees may have to settle for housing that is not ideal but the only available option, further limiting their choices.

#6 Mortgage Debt

Furthermore, these individuals may find it challenging to sell their homes, particularly if they have a mortgage. According to the Urban Institute, the number of older adults with mortgage debt has increased over the years, with 32% of adults aged 65-74 and 20% of adults aged 75 and above having mortgage debt. This means that retirees may have to continue working to pay off their mortgage or delay retirement to keep up with their mortgage payments, limiting their options for affordable housing.

In conclusion, the affordable housing crisis is a pressing issue that affects many retirees who fall into the middle-income bracket in the United States. Factors such as high housing costs, limited housing options, and difficulty selling homes contribute to their inability to move out of their current housing situation. As the population ages, policymakers and community leaders must address this issue by developing affordable housing options that cater to the unique needs of older adults and creating policies that incentivize homeownership and support homeowners who wish to sell their homes. By doing so, middle-class adults nearing or in retirement can have more options for affordable housing and improve their quality of life.