How Much Nursing Home Care Can Home Equity Finance?

Older adults who have income and assets have choices should they need long-term services and supports (LTSS). In this paper we estimate the extent to which older adults could potentially use home equity to help pay for nursing home care. By estimating the relationship between home equity and care costs, we provide an upper bound on how much assistance with LTSS home equity might purchase. Using a large sample of older adults from the American Community Survey in 2011, we compare their estimated level of home equity to the cost of nursing home care in their area. We find that the typical (median) older adult is able to purchase just over half a year of care in a private room. However, the median conceals a great deal of variation. For example, 28% of older adults are renters and therefore have no home equity to help pay for LTSS. In addition, those at greatest risk of needing LTSS, such as those age 85 and older, and those with one or more functional limitations, have lower ability to finance LTSS through home equity primarily because they have low rates of homeownership. High home equity levels--and a correspondingly high number of nursing home days that it could finance--are concentrated in a limited number of states and metropolitan areas such as Washington, California, Illinois, Massachusetts or the District of Columbia. By contrast, those living in states and metropolitan areas in the rustbelt and that were hit hard by the recession have low home equity values to spend on nursing home care.