Health shocks and housing downsizing: How persistent is 'ageing in place'?

Individual preferences for 'ageing in place' (AIP) in old age are not well understood. One way to test the strength of AIP preference is to investigate the effect of health shocks on residential mobility to smaller size or value dwellings, which we refer to as 'housing downsizing'. This paper exploits more than a decade worth of longitudinal data to study older people's housing decisions across a wide range of European countries. We estimate the effect of health shocks on different proxies for housing downsizing (residential mobil-ity, differences in home value, home value to wealth ratio), to examine the persistence of AIP preferences. Our findings suggest that consistently with the AIP hypothesis, after ev-ery decade of life, the likelihood of downsizing decreases by two percentage points (pp). However, the experience of a health shock partially reverts such culturally embedded pref-erence for AIP by a non-negligible magnitude. We estimate a 9pp increase in the proba-bility of residential mobility after the onset of a degenerative illness), a 0.6 a fewer rooms after the onset of a degenerative illness. Such estimates are larger in northern and central European countries.(c) 2022 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY license( http://creativecommons.org/licenses/by/4.0/ )