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The Age-Qualified Active Adult Housing Market

The Age-Qualified Active Adult Housing Market
Special Studies, August 13, 2007
By Paul Emrath and Helen Fei Liu
Report available to the public as a courtesy of
Potential home buyers who are 55 years of age or older have three choices for the kind of community they may want to move to next. They can choose a community specifically restricted to those 55 and older, a community that is predominately in that age bracket, or a community with no specific age dominance. Inside the industry, communities restricted to those 55 and older are usually called “age-qualified,” due primarily to marketing concerns and presumed negative connotations associated with the word “restricted.”  Such communities generally require householders to be 55 years of age or older, based on the Fair Housing Law governing age-qualified housing. [1]
For purposes of this article, we consider owner occupied housing in these communities to be “age-qualified active adult.”  The term active adult has become common in many areas and, although usage has never become completely standardized in what is a rapidly evolving segment of the market, usually refers to owner-occupied homes. This article uses one of the few data sources that contains information about age-qualified owner-occupied housing, the American Housing Survey (AHS), conducted in odd numbered years by the Department of Housing and Urban Development (HUD) and the Census Bureau.
Over a period of years, NAHB has worked with HUD and the Census Bureau to improve the quality of the data that the federal government collects on 55+ housing markets. One result of these efforts is that, beginning in 2001, the AHS began asking respondents whether the building or neighborhood they live in is age-restricted, and if not, whether it is occupied mostly by people age 55+ anyway. This new question allows us to distinguish, for the first time, 55+ households living in different types of communities.  The most recent version of the AHS was conducted in 2005.

A Snapshot of Existing Homes
Chart 1 shows the shares of owner-occupied housing units by community type, based on data from the 2005 AHS (see also Table 1).  Out of the 69 million owner-occupied housing units in the U.S., age-qualified active adult housing accounts for just under a million, about 1.4 percent. “Other 55+ Communities”  (identified by 55+ households who reported their neighbors are mostly 55 and older, although the neighborhoods are not explicitly age-qualified, account for seven million or about 10 percent.  As the chart shows, most 55+ households  live in ordinary communities that are neither age-qualified nor occupied mostly by people over age 55, indicating that communities designed for 55+ households have so far captured a relatively small share of the total potential market.
Age-qualified active adult homes are not evenly distributed across the country or within localities (Table 2). Compared to 55+ households in other types of communities, a greater share of age-qualified active adult homes are in the South Census region; fewer are in the Midwest. Nearly one half of the households in age-qualified active adult homes are in the South, compared to only 7.5 percent in the Midwest. Possible explanations for this pattern include population density, climate, and the price of homes. The AHS also shows that a large share of age-qualified active adult homes (71 percent) are in suburbs.
Share of Owner-occupied Housing Units by Community Type
Recent Home Buying Activity
This section focuses on 55+ households who have moved recently into the various types of communities. One of the advantages to having the question on age-restriction in the AHS is that it automatically produces the  information normally collected in the survey for people who have moved into that type of community —for example, the reason they moved. The results show that nearly 20 percent of the recent movers who chose age-qualified active adult housing reported that they wanted higher quality housing units, compared to well under 15 percent of 55+ households those who moved into either unrestricted but predominantly 55+ communities, or communities with no particular age dominance (Table 3). Also, only one and a half percent of the households moving into age-qualified active adult homes reported moving because they wanted larger housing units, compared to about 10 percent for households moving into other 55+ communities. These differences indicate that customers for a home in an age-qualified active adult community tend to move because they want a different home that is higher quality in some sense, but not necessarily larger.
One awkward feature of the AHS is the high share of 55+ households who report moving or choosing a community for “other” reasons —that is, for a reason not listed on the AHS questionnaire.  Part of the reason may be that the AHS doesn’t list some of the reasons for moving that could be important to older households, such as concern for personal safety or a desire to be near health-care facilities.
The AHS also asks recent movers why they chose a particular community. In age-qualified active adult housing, the most commonly reported reason is the design and looks of the community, followed by closeness to relatives (Table 4). Proximity  to leisure activities also distinguishes age-qualified active adult housing: 22 percent of movers into that type of community reported being attracted by leisure activities, compared to only 7 percent of “other 55+ households” reported moving because of this. Again, the share reporting a reason not specifically mentioned in the AHS is substantial.
An alternate survey may shed additional light on 55+ reasons for moving or choosing a community that the AHS doesn’t capture  In 2003, NAHB and AARP undertook a collaborative effort to study the housing preferences of persons age 50 and older.  The survey asked respondents if particular community features would be important to them in their later years, and whether they currently have these features. The results show that a hospital, doctor’s office or drug store is important to over 80 percent of 50+ households. These are among the community features not captured by the AHS questions. Moreover, there is a gap of at least 20 percentage points between these percentages and the share of 50+ households reporting that they actually have these health-related facilities in their communities. This suggests that there may be market opportunities for developers to locate age-qualified communities within range of healthcare facilities.
The AHS also shows that many new home buyers age 55 or older are moving out of an owner-occupied, single family home. This is especially true among new home buyers in age qualified active adult communities, where the share of previous single family home owners approaches 100 percent. [2]
Table 5 shows 55+ households as a share of the home buying market, and breaks this down according to the type of community into which they move. The table shows that 55+ buyers are more likely to buy new homes —total 55+ households account for 18 percent of the home buying market, but about 21 percent of the market for new homes. Moreover, older new home buyers have a somewhat greater tendency to “buy” custom homes, [3] so 55+ households account for over 24 percent of the market for new custom homes.
According to the AHS-derived shares, age-qualified active adult communities account for only 1 percent of the home buying market, and “Other 55+ Communities” account for about 5 percent. Together these indicate that 6 percent of recent home buying is in 55+ dominated communities. Another 12 percent of the market consists of 55+ households buying homes in communities that are neither restricted to nor dominated by 55+ households, indicating that 55+ communities are capturing about one third of their potential customers —and again,
most of these are in communities that are not age-qualified.
New Construction
By applying the AHS percentages of market shares to the NAHB housing forecast, [4] it’s possible to generate estimates of 55+ construction for calendar year 2007 (Table 6). The estimates show that housing units sold to or occupied by 55+ households will account for more than 370,000 housing starts, about 263,000 of these single-family. The estimates also show that 55+ customers should account for more than 190,000 of the projected new single family sales, and more than 900,000 of the projected existing single family homes sales.
Among the new housing units purchased or otherwise occupied by 55+ households in 2007, about 40 percent should be in age-qualified or age-dominated  communities, and around one third of the projected sales of existing single-family homes should be in these types of communities.
By combining the projected numbers of 55+ housing starts for calendar year 2007, and the average values of the new units from the 2005 AHS, it’s possible to estimate the total dollar value of new construction for the 55+ market in 2007. [5] The results, shown in Table 7, include an estimated value of $7.3 billion in  new housing built in age-qualified active adult communities in 2007.
In one sense, the estimate of $7.3 billion represents a substantial number. However, it’s relatively small compared to the $74.1 billion of new housing purchased by 55+ households that is neither in an age qualified community nor in a community that is occupied primarily by 55+ households. This is an further indication that age qualified active adult construction is still capturing a relatively small share of the maximum potential number of customers.
Future Growth
Demand for housing in age-qualified or age-dominated communities, while still accounting for a relatively small share of total housing activity, has been growing and should continue to grow. According to the U.S. Census Bureau, the number of Americans age 55 or older has increased from 52.2 million (accounting for 21.0 percent of the total population) in 1990 to 59.3 million (still about 21 percent) in 2000, and to 67.0 million (22.6 percent) in 2005. Based on NAHB’s forecast, the 55+ population will grow to 76.6 million (24.5 percent of the population) in 2010, and to 85.6 million (26.3 percent) in 2014. The growth in the 55+ population in the near future can be largely attributed to the aging of the Baby Boomers, who will continue to help to fuel the demand for age-qualified active adult housing.
Readers interested in more information on the 55+ housing market can find additional research based on the AHS and other data sources on the NAHB 50+ Housing Council web site (readers need to be 50+ Housing Council members in order to access the online research). [6]
For more information about this item, please contact: Paul Emrath at 800-368-5242 x8449  (
[1] The 1995 Housing for Older Persons Act allows a housing project to legally exclude all school-age children if it satisfies any one of the following three criteria:
i). It demonstrates an intent to house people age 55 or older and has at least one person of that age in 80 percent of its occupied units.
ii). It’s occupied only by people who are age 62 or older.
iii). It’s designed for and occupied by elderly people under some Federal, state, or local government program.
The first of these is the one used most often in the age-qualified active adult market.
[2] For details, see Chapter 7 “New Construction for the 50+ Market” in the Profile of the 50+ Housing Market.
[3] Custom homes are defined as those built on the customer’s lot, with the owner either hiring a general contractor or in some cases functioning as the general contract him- or herself.  Technically, these homes do not go through a sale in the same sense as a spec home in a residential subdivision, but for simplicity this chapter includes people who acquire new custom homes among the home buyers.
[4] NAHB Executive-Level Forecast in You must subscribe to to access the forecast.
[5] The average home value is $316,541 for an age qualified active adult unit, $393,562 for a unit in “Other 55+ Community”, and $367,478 for a unit in ordinary communities that are neither age-qualified nor occupied mostly by people over age 55 (the average values are calculated using the units built between 2001 and 2005 to have a reasonable sample size).  Multiplying the average home values by corresponding housing start estimates, we get the value of new construction in 2005 dollars.  Then we bring the value estimates forward to 2007 values using NAHB’s forecast for the percentage change in the OFHEO repeat sales index. 
[6] NAHB 50+ Housing Council Research 

For more information about this item, please contact Paul Emrath at 800-368-5242 x8449 or via email at

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