Another Look at Effects of 'Adults-Only' Age Restrictions on Housing Prices
24 Pages Posted: 14 Oct 2011
Date Written: October 10, 2010
This study reexamines the price effects of age restriction on housing prices. Our data cover a period when the housing market is taking a steep downturn. We argue that, when housing prices are falling, seniors are more likely to avoid investing in housing for at least two reasons. First, seniors are relatively more sensitive to their immediate equity loss than younger homeowners, mainly due to the limited remaining lifetime over which they can afford to wait; Second, age-restriction acts as a luxury good, with seniors not willing to pay for reduction in neighborhood uncertainty, eliminating buyer demand for this segment of the population. If this 'larger demand loss' outweighs the positive externality of the reduction of the reduction in neighborhood uncertainty during the market downturn, we would observe that age-restrictions reduce property values. Using data from Broward County, Florida for the years of 2005 to 2007, we find a significant discount in residential condominium prices due to age-restrictions. In particular, we find that imposing age-restriction on properties decreases housing prices by 17.9% during the period May 2005 to April 2006, while the discount is worse, 22.7%, during the later period May 2006 to May 2007.
Keywords: age restricitions, housing prices
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