Home ownership pays off - especially in old age

The burden of housing costs has been in the public eye for some time. Critical life events and retirement increase the financial pressure on households. Tenant households are significantly more affected by the burden of high housing costs than homeowners.

A team from the German Centre for Gerontology has studied the burden of housing costs, paying particular attention to the differences between owner-occupied and rented households. For older people - especially pensioners - the share of household income that has to be spent on housing costs is of particular importance.

Germany is one of the countries in the European Union whose population spends the highest proportion of their disposable income on housing. For example, around one fifth of those over 65 spent more than 40 percent of their disposable income on housing in 2019. The rising housing cost burden in old age is based on the sharp decline in household income.

There are clear differences between rental and owner-occupied households. Even before retirement, the average housing cost burden is much higher for rental households than for owner-occupied households. While the housing cost burden for owner-occupied households increases with age from 13.8 to 15.7 percent, the difference is greater for rental households: it rises from 25.9 percent to 28.7 percent.

After retirement, the inequality between renting and owning households is even greater. Homeowners are in a better position than renters because their housing costs decrease with the transition to retirement due to the reduction in mortgage interest payments. In contrast to owners, renters are more dependent on landlord decisions about, for example, modernisation and rent. This is because rents and service charges are relatively difficult to reduce. This is especially true in today's very tight local housing markets, where demand exceeds supply.

Conclusion: Buying a home early in life pays off especially in old age.

(Photo: © Portraitor, Pixabay)