When society encourages older people to leave their houses and condominiums to move to sheltered housing and rental apartments, we risk leading an entire generation straight into an economic trap. In a country where 70 percent of seniors own their homes, this is not just an individual's problem – it is a ticking societal time bomb!
Sweden faces a dramatic demographic change. The number of people over 80 will increase by 39% by 2033 and by as much as 53% by 2043. With this development, sheltered housing has emerged as municipalities' favorite solution for future elderly housing. They offer accessibility-adapted apartments with a warden who contributes to social community. For many elderly people who feel unsafe or lonely, this appears to be the perfect solution.
But is it really that simple? Take Lennart and Marianne, a typical Swedish couple in their 70s. They bought their house for 400,000 kr in 1984, today valued at 2.5 million kr. They are considering selling and moving to a newly built sheltered housing unit with 60 sqm and a monthly rent of 12,000 kr. Less maintenance, more accessibility and service. But beneath the surface lurks an economic trap.
After sale and capital gains tax, they receive approximately 2 million kr. But after 20 years in the rental apartment, they will have a negative equity of just over 150,000 kr. Is that really security?
If they instead choose a senior condominium and thus remain in the property market, they can after 20 years of conservative value development and lower monthly costs instead have built up nearly 4 million kr. Even without price development, they will have a home worth 2 million at 90 years of age.
Encouraging older people to leave the property market is neither humane nor economically defensible from a societal perspective.
What makes the situation particularly problematic is that the decision to leave the property market often becomes irreversible. Once a senior has sold their home, the threshold back to owned housing often becomes insurmountable. It is difficult to get work or loans, pension income falls and property prices rise.
Social isolation is a growing problem among seniors. While sheltered housing can create social context, modern senior condominiums offer greater opportunities to influence one's living environment and social existence. A newly built condominium is as easy to maintain as a rental apartment. With deferral rules for capital gains tax, the financial burden is reduced.
Municipalities, for their part, argue that sheltered housing frees up homes for younger families. But even greater incentives are created with senior condominiums because we then get an alternative that builds capital and security instead of consuming it - which in turn reduces the burden on municipalities' financial support systems.
But what is security? When the pension that seemed sufficient at 65 becomes insufficient while rent rises with inflation, a downward spiral is created. Financial stress leads to poorer health and quality of life, which increases the burden on care and nursing. A stressed economy can also lead to social isolation, when older people can no longer afford to participate in activities the way they wish. So this is not just a question of individual finances - it is a societal challenge.
Above all, we must start seeing the housing question for older people as the welfare issue it actually is. For the 70 percent who own their homes, the choice is clear - senior condominiums offer an economically sustainable future. But we cannot ignore the 30 percent who are already outside the property market. Special efforts are required here - from subsidized rents and enhanced housing benefits to more sustainable property projects so that rents do not skyrocket in the same way as for new constructions. It is about creating paths into, not out of, property ownership to avoid a permanently divided society among our elderly.
What can be done then? First, we must stop treating all senior housing as equivalent alternatives. Municipalities and housing actors need to be much clearer about the economic consequences of different forms of housing. Secondly, political initiatives are needed that make it easier for older people to remain in, or move between, owned forms of housing:
- Equalize the support systems for senior housing.Today's investment support provides up to 3,600 kr per square meter for new construction of rental apartments for the elderly, while condominiums can only receive support for adaptation of common areas - and then limited to a maximum of 200,000 kr. This is a dramatic difference that distorts the market and steers older people toward rental housing despite it often being economically disadvantageous in the long term.
- Reintroduce the possibility of pension contributions for 50+.Sweden has gone from allowing an annual deduction of 12,000 kr in 2008 to completely abolishing it in 2016. As one of the few OECD countries without broader stimulation of private pension savings, we need a system that at least reflects entrepreneurs' opportunities.
- Create innovative financing models for future senior housing.Enable younger people to invest in future senior housing, with municipal guarantee and subletting rights. This would stimulate construction, activate unutilized capital and secure future access to adapted housing.
We must take a comprehensive approach to seniors' housing and finances. Encouraging older people to leave the property market for an existence with constantly rising rents is neither humane nor economically defensible from a societal perspective. Instead, we need to create conditions for dignified aging where financial security goes hand in hand with adapted housing - regardless of whether one owns or rents one's home.
Michael Guldstrand
Entrepreneur & business leader in financial services, IT and community properties.
