The reverse mortgage: a tool for funding long-term care and increasing public housing supply in Spain

Abstract

Population ageing is one of the most significant challenges facing the world in the twenty-first century. Furthermore, people aged over 65 typically have a level of income below the national average, but the homeownership rate among those in this age group tends to be high. Equity release schemes, specifically reverse mortgages, can help cover increased care costs and ensure a reasonable level of income, thus guaranteeing the well-being of older adults. However, this product has not been greatly developed by private entities. If the State were to implement this financial operation through public administrations, it could obtain homes that might then be included in public housing stocks. Thus, our paper aims to contribute to the literature on government-based reverse mortgage systems. Under our assumptions, the results showed that if 313,833 homes were reverse-mortgaged, the investment by the public administration would be around 0.73% GDP, with this being a feasible proposal. This work helps to create alternative methods to finance problems related with the ageing of societies from a public perspective.