Homeownership, Social Insurance, and Old-Age Security in the United States and Europe

Relatively few Americans have accumulated substantial savings outside of their employer-sponsored retirement plans, yet most own their homes. The traditional view of the retirement income system as a three-legged stool supported by Social Security, private pensions, and savings may be better viewed as being supported by Social Security, pensions, and homeownership. Country-specific economic, social, and political developments throughout modern history mean that homeownership rates and the relative importance of homeownership for old-age security vary widely across developed countries. Many countries, however, are increasingly promoting homeownership as an effective way of building assets, a de facto self-insurance mechanism for old-age security, and a substitute for various social transfers. This paper uses data from the Health and Retirement Study (HRS) and the Survey of Health, Ageing, and Retirement in Europe (SHARE) to better understand the role of homeownership in retirement before and after the Great Recession for the United States and nine Western European countries: Austria, Belgium, Denmark, France, Germany, Italy, the Netherlands, Spain, and Sweden. It begins by comparing trends in homeownership rates among older adults and the key characteristics of housing-related policies and regulations that potentially impact home acquisition. It then examines home equity trends, the prevalence and burden of housing debt, and the relative importance of housing as a source of retirement wealth. Next it provides an overview of equity release options and estimates how much older households could increase their incomes by fully monetizing their housing equity. Finally, the paper discusses the prospects for and limits of home equity release and asset-based welfare policies.