Baby boomers own big houses and it's affecting the housing crunch Lots of older Americans say they'd love to downsize, but it doesn't make financial sense. The housing roadblock has left some would-be buyers stuck. We asked experts what policies could change that.

Many baby boomers own homes that are too big. Can they be enticed to sell them?

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SCOTT SIMON, HOST:

Housing prices are high, and there aren't a lot of options. One factor in the supply shortage is that many older people still own many of this country's large houses, even though they may not really need the extra space. Many say they'd like to downsize, but that doesn't make financial sense. NPR's Laurel Wamsley took a look at the housing mismatch and what might be done about it.

LAUREL WAMSLEY, BYLINE: Sherry Murray and her husband bought their house in the North Hills of Pittsburgh in 1991 for $240,000. It's got four bedrooms, including some they don't use anymore. She says many of her friends are in the same boat.

SHERRY MURRAY: So basically, what a lot of us have done is just kind of not walled off the extra bedrooms but closed the doors. It's just too much house at this point.

WAMSLEY: Murray is 73, and her husband is 80. The house is paid off, and they could sell it for about 2 1/2 times what they bought it for. But even though Murray says she's been looking for a smaller home for years, they've stayed put.

MURRAY: You don't want to be economically stupid. If my house is worth even $650,000, I don't want to spend 1,100,000 to downsize substantially, knowing that on top of that, I'm probably going to have to pay some HOA fees. It just is a dumb economic decision to spend that much extra money for getting so much less.

WAMSLEY: Across the country, many baby boomers are facing their own version of this. It can be cheaper and more appealing to stay in their current large house than to sell it and move to something smaller. Smaller homes can cost more if they're newer or are in a community with extra services. Some areas have few one-story homes, and many boomers are wary of condo fees, capital gains taxes or taking out a new mortgage. So they stay where they are.

A recent analysis by real estate brokerage Redfin found that baby boomer empty nesters owned twice as many of the country's three-bedroom or larger homes compared with millennials with kids. That's a mismatch with real consequences. For younger buyers, it means those homes with more bedrooms aren't hitting the market. And for older adults, it can mean living in a house that's too much work and could be increasingly unsafe with stairs and a risk of falls. Gary Engelhardt studies the economics of aging at Syracuse University. He says there are basically two approaches to deal with what's happening.

GARY ENGELHARDT: From a policy perspective, you either provide subsidies or tax credits for home modifications that allow individuals to age in place.

WAMSLEY: That is, give money to make seniors' current housing safer, which is good, but it doesn't put those houses back into the market. The second approach, he says, is to encourage the building of housing that's well-suited to older Americans.

ENGELHARDT: You promote the construction of new residential units that are going to be ADA compliant and all the types of features that lend themselves to a better match of functionality at older ages.

WAMSLEY: For instance, the government could create a tax credit that would encourage developers to build accessible housing. And there are other policy changes that could make it easier to build housing for different life stages and thereby entice boomers to downsize. Danielle Arigoni is managing director for policy and solutions at National Housing Trust.

DANIELLE ARIGONI: I think one of the things that we know to be true is that older adults want to be able to age in their communities. That's where their social networks are. That's where transportation systems may be that they're familiar with.

WAMSLEY: Even shopping and doctors. But many residential areas where baby boomers live are zoned only to allow single family homes, which means that when older adults decide their current homes are too big, they basically have to move out of their neighborhoods.

ARIGONI: People want to be able to age in their communities, but there are very few options available for people who do want to do that but want to downsize.

WAMSLEY: So if cities and states want to encourage more right-sizing, they could change their zoning rules to allow more types of housing in all neighborhoods. Municipalities can also permit and encourage dwellings like backyard cottages, which Arigoni says offer a lot of advantages, like the potential to be on all one level.

ARIGONI: But the other thing that it does really nicely is it creates a mechanism for greater financial stability for older adults if they want to, again, remain in the community that they love but don't need the large house that they've always lived in.

WAMSLEY: The homeowner can build that backyard cottage and move into it themselves, then rent out the larger house. That's especially useful if the older adults are equity-rich but cash-poor, and it adds another house to the rental market. To unlock more supply, you could allow homeowners with large lots to split them, creating space for a new house to be built. It might take all of these policies and more to get America's housing supply better matched to its aging population. Laurel Wamsley, NPR News.

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