Living arrangements among the very old have important implications for both the well-being of the individual and the financial demands on families and the public sector.  As older individuals come to need greater care late in life, they face choices of whether to obtain home health care to allow them to maintain an independent household, move to an assisted living facility, move in with children or other family members, or move to a nursing home. These choices have obvious implications for the degree of independence that older individuals maintain. But they also raise very different financial considerations for the individuals, their families, and society.

Existing research has examined the choices that homeowners make late in life, with an emphasis on whether and when these households tap their home equity.  These studies find that most homeowners do not draw down their housing wealth until very late in life after the loss of a spouse or a move into a nursing home (Venti and Wise, 2004; Walker, 2004). Research that has examined the choice of living arrangements more broadly has also found that both health and wealth are strongly associated with these choices, with homeowners generally less likely to move to nursing homes (Borsch-Supan et al., 1993; Heiss, Hurd, Borsch-Supan, 2003). 

A variety of factors contribute to the different living arrangement trajectories of homeowners, including differences in income, wealth, and asset tests employed by Medicaid. But another contributing factor related to housing tenure may be the ability to afford the out of pocket costs for both housing and home health care. With many older homeowners owning their homes free and clear and thus facing lower monthly housing costs, they may have greater ability to absorb the cost of home care services compared to renters.  By the same logic, older owners still paying a mortgage may be less able to take these added costs on and so more likely to have to give up living independently and either move in with family or to a nursing home. If this is the case the fact that a greater share of homeowners are carrying mortgage debt late into life may have an effect on the share of older households moving in with family members or opting for nursing home care. 

The goal of this study will be to examine the factors that are associated with changes in living arrangements late in life, with a focus on how these choices vary with tenure and degree of housing cost burdens. The Health and Retirement Study will be used to address these questions focusing on those aged 75 or older. The analysis will exploit the panel nature of the data to observe how changes in living arrangements follow from changes in the need for care.  The study will employ both tabular analysis of the transition rates between different living arrangements of older households in different housing situations and multivariate analysis of these transitions accounting for a host of household characteristics, including income, non-housing wealth, and bequest motivations.