Reference-dependent housing choice behaviour: why are older people reluctant to move?

Abstract

Loss aversion has been identified as an inhibiting factor in residential mobility and may contribute to a well-documented reluctance to move of older people. This paper provides insights on whether loss aversion, in relation to the locational attributes of housing alternatives, affects the preference for alternative housing choices of older people. We propose an extended framework to measure symmetric as well as asymmetric valuation of losses and gains by an individual. The framework is applied in a discrete choice model based on a stated choice experiment with 440 Dutch home owners in the age group of 65 - 75 years. We find clearly that the current living situation (reference) affects the housing choice behaviour. Among other things, we find a general aversion to changing the type of location for almost all possible moves between city, suburban and town. The results have clear implications for ageing-in-place policies which are currently being developed in many countries.