Nguyen, H. T., Mitrou, F., & Zubrick, S. R. (2021). ‘Retirement, housing mobility, downsizing and neighbourhood quality – A causal investigation’, Life Course Centre Working Paper Series, 2021-09. Institute for Social Science Research, The University of Queensland.
Ha Nguyen, Francis Mitrou, and Stephen R. Zubrick.
Download: Life Course Centre Working Paper 2021-09
Population ageing has led to increasing interests among policy makers and researchers in the work, consumption and wealth trajectories of older individuals. One particular interest is the way that housing wealth, which represents the largest share in the household wealth portfolio of the elderly in developed countries, is accumulated before retirement and how that home equity is drawn on after retirement. Evidence from existing literature is quite mixed regarding the extent to which individuals adjust their housing wealth in the form of housing mobility or housing downsizing around the time of retirement. Our study contributes to this literature by exploring the first causal impact of retirement on the geographic mobility and housing downsizing of older Australians.
Using 19 waves of high-quality data from the Household Income and Labour Dynamics in Australia survey and a fixed effects instrumental variables model, we find that retirement leads to a statistically significant and sizable increase in the probability of making a residential move or the likelihood of becoming outright homeowners. We also find that individuals downsize both physically and financially and tend to move to better neighbourhoods or closer to the coast upon retirement. We additionally discover that some housing adjustments take place up to 6 years before retirement. Moreover, our results reveal significant heterogeneity in the retirement impact by gender, marital status, education, housing tenue, income and wealth. Within couple households, housing mobility choices are primarily influenced by the wife’s retirement while housing downsizing decisions are only affected by the husband’s retirement.
Our findings of the substantial and heterogeneous impact of retirement on housing choices have some potentially important methodological and policy implications. For example, our results highlight the need to adequately account for the endogeneity of retirement as failing to do so would under-state the impact of retirement. From a policy perspective, our findings suggest that policies to increase retirement ages would also postpone the retirement attributable housing adjustments among older people. The evidence of the substantial housing mobility and downsizing around retirement may be useful input to housing or fiscal policies as it demonstrates that the unleashing of accumulated housing equity occurs well before some major life course events, such as moving to nursing homes or death, as identified in the current literature. Furthermore, the heterogenous retirement impact on housing choices identified in this paper indicates that such policies may have differential effects for individuals with varying socio-economic backgrounds.