Obama Stimulus Holds Benefits for Seniors
By Adrian Sainz
AP Real Estate Writer
From a one-time $250 payment to a 50 percent increase in the limits for reverse mortgages, there are some housing-related items in President Barack Obama's stimulus plan that potentially can help seniors maneuver through difficult economic times.
The current economic upheaval has forced retirees and seniors who are still working to re-evaluate their retirement plans. Americans over 55 are more vulnerable to economic pressures because they have less time to recover from financial losses.
The stimulus "will help, but we're fighting a very powerful current going the other way," said David Levy, chairman of the Jerome Levy Forecasting Center in Mount Kisco, NY.
Housing costs are a major issue for seniors, especially retirees on fixed incomes.
For seniors, the most direct form of help comes in a one-time payment of $250 for nearly 55 million people who get Supplemental Security Income or Social Security. Eligible recipients don't need to sign up for the payments, which are expected to be received by late May.
That money can be used for anything, including rent or mortgage payments.
That will bring a little relief for senior homeowners who spend a median amount of $571 a month on housing expenses, including taxes and utilities, according to Census data. That may not sound like much depending on where you live, but one in four seniors spend 30 percent or more of their monthly income on housing expenses.
Fortunately, nearly 70 percent of homeowners 65 and over own their homes free and clear. And for those in financial need, that equity can be a new nest egg.
The stimulus package raised the loan limit for a reverse mortgage to $625,500 from $417,000 through the end of this year. Reverse mortgages allow homeowners to borrow from the home's equity. The higher loan limit allows qualified borrowers to potentially get higher monthly payments. But as equity drops, so does the amount one can borrow.
The loan is due upon the death of the owners, and the house is usually sold to repay the debt. And here's a warning: Many experts stress reverse mortgages should be a last resort because of the high fees and interest — which can total 4 to 8 percent of the loan — and the complicated nature of the loans.
Beyond reverse mortgages, the stimulus also provides for $4 billion for the Public Housing Capital Fund, double last year's budget. The fund provides money for public agencies that own or operate low-income public housing, and that includes a sad number of senior renters.
While renters make up just one-fifth of the population over the age of 65, more than half of them are spending 30 percent or more of their income on housing, Census shows.
Help is needed to reduce a backlog in two types of housing available to low-income seniors, where the wait is long enough that "people are dying on the waiting list," said Elinor Ginzler, AARP's senior vice president for livable communities.
On the job front, one thing that will help seniors is increase in funding for AARP's Senior Community Service Employment Program, which helps older workers to get training and re-enter the job market.
The stimulus contains other items related to energy efficiency, transportation, health care and food stamps — all of which concern seniors.
There also are some items that can indirectly help seniors, such as a first-time homebuyer tax credit of up to $8,000. Only about 6 percent of first-time home buyers were 55 or above in 2008, according to the National Association of Realtors. But anything that helps spur sales could level out home prices, stop equity loss, and make it easier for seniors to sell their home and move.
"Because seniors are more risk averse ... for practical reasons, the housing market may be slower to come back in retirement areas" such as in the Sun Belt, where developers overbuilt, Levy said.
Adrian Sainz can be reached at email@example.com.
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