Retiree Havens Turn Younger to Combat the Housing Bust 

By Kelly Greene and Jennifer Levitz, The Wall Street Journal

December 1, 2008

For Sheldon Behr, buying a condo in Century Village East has meant the chance to live out his retirement years with other older adults who enjoy golf, long walks and comedy nights at the clubhouse. But with the financial crisis deepening and the housing market stalled, a growing number of units at the 55-and-over community are lying vacant.

Sheldon Behr
Some residents are now considering the once unthinkable: letting younger people in -- a proposition that has pitted neighbor against neighbor. "We don't want someone to come in and suddenly have a flock of kids," says Mr. Behr, 65 years old, who opposes the move. "That'll destroy our village forever."

At "active adult" developments across the U.S., residents are debating whether to scrap the age restrictions that have helped define their way of life for almost five decades. Proponents of "age desegregation," as it's known in the industry, say opening the doors to people under 55 is the only way their once-idyllic enclaves can stay afloat amid a worsening economic climate.

From Florida to Arizona, condos are sitting idle as potential buyers find themselves stuck, unable to sell their houses and relocate. Residents of one New Jersey 55-plus development are living next to open foundations, with only 32 of 175 planned homes sold. And with retirement accounts hammered by the investment markets' plunge, people living in these communities are falling behind on homeowners' dues and scaling back on clubhouse activities.

But desegregation is nonetheless a hard sell among some residents of these developments, who say the change would ruin the dream they bought into in the first place. An influx of younger residents could also affect relations with surrounding neighborhoods. Municipalities have long favored developments for retirees because they don't require additional services like schools.

"Towns see these people as contributing to the tax base but not costing the community so much," says William Frey, a demographer with the Brookings Institution, a Washington think tank. "But there is a whole host of ancillary services that go with having lots of young children and teenagers. Then, you're talking about a significant increase in municipal expenses."

No one is predicting that age-restricted living will disappear entirely. But the financial downturn could be the tipping point that forces some places to reinvent themselves.

Many of these communities had already been struggling with declining sales as aging baby boomers either postpone retirement or opt to retire elsewhere. Last year, about 1.1 million households could be found in active-adult settings, down from 1.8 million in 2001, according to the National Association of Home Builders. And in a recent survey by AARP, the membership group for older Americans, almost nine in 10 people said they don't want to move at all in retirement; instead, they want to "age in place."

Retirement communities were popularized in the early 1960s by real-estate entrepreneurs like Del Webb, whose Sun City developments promoted the idea of a leisure-filled lifestyle specifically for older adults. In Arizona, California and Florida, retirees lined up to buy one-story villas bordering golf courses.

Usually run by elected boards of homeowners, these communities have spread to the Midwest and Northeast in recent years. They usually offer activities geared toward retirees, feature strict rules about homes' appearances, and have their own security staff and volunteer "posses" to keep an eye out for violations.

Typically, 80% of residents in active-adult communities must be at least 55 years old to meet federal regulations that allow developments to exclude children. (Many neighborhoods have rules requiring one household member to meet the age requirement.) Some enjoy low taxes. Residents of Sun City, a retirement community in Sun City, Ariz., for instance, don't pay city taxes because the development is technically unincorporated. They also pay relatively low school taxes, making their overall tax burden one-half to two-thirds lower than people in nearby towns, according to the Arizona Department of Commerce.

Lower Age Requirement

Last year, residents of the nearby Sun City Grand in Surprise, Ariz., voted to lower their age requirement to 45 from 55 -- though children under age 19 still aren't allowed as permanent residents.

The board of the 9,802-unit development, built in 1996, "felt like it would help our community financially in many areas," says Meda Cates, membership director for the Sun City Grand Community Association. "As people grow older, they stay home more. They don't golf, they don't use the facilities or the restaurants."

The Arizona Republic

NEW NEIGHBORS: The Sun City Grand Dance Club performs at this year's Oktoberfest. The community recently lowered its age requirement.

John Longabaugh, a city councilman who lives in the development, puts it this way: "If everybody's 80, nobody's using the two weight rooms."

Since Sun City Grand relaxed its age restrictions, the community has drawn people like Tom Butler, 48, a kitchen designer, and his wife, Jill, who is 53.

The place popped up on their radar a year ago, when Ms. Butler visited her daughter-in-law's grandparents, who live in the community. She says she was "totally charmed by it," and drawn to the "plethora of activities." This fall, the couple bought one of Sun City Grand's "Casita" models, a ranch-style home with a pool and a guest house. "Sometimes, people look at us and say, 'You're not old enough to be here,' " says Ms. Butler. "But we take it as a compliment."

No one tracks the number of active-adult communities that are lowering their age limits or dropping them altogether. But developers and homeowners' associations say it's becoming the strategy-of-last-resort the longer homes sit vacant. Leisure World in Mesa, Ariz., has loosened its age requirements, and the homeowners' association at Arizona Traditions, another development in Surprise, is mulling whether to lower the minimum age to 45. In New Jersey, the age restrictions have been lowered or dropped for at least nine new projects, while an additional 10 planned developments were scrapped altogether, says Jeffrey Otteau, president of Otteau Valuation Group Inc., a real estate market-analysis firm in East Brunswick, N.J.

Dominoes and Leaf Peeping

At the Esplanade in Hudson, Mass., near Boston, people 55 and older can buy two-bedroom condominiums for about $250,000. Movies play on a big-screen TV in the common area on Saturday nights, regular groups play dominoes, and there are leaf-peeping outings to New Hampshire.

But since it broke ground in 2005, only two-thirds of the Esplanade's 140 units have been sold. The company has recouped $20 million of its $32 million in construction costs, says Joanne Foley, the attorney for MP Development LLC, which built the Esplanade. So last March, MP petitioned the town of Hudson to allow it to sell condos there to younger buyers.

Lou Tagliani, a 67-year-old retired physicist, is among the residents who have spoken out against the plan. He and his wife moved into the Esplanade because "we want to live with people our own age and interests," he says. Bringing in younger people "would change the general complexion of the community."

So far, homeowners in Mr. Tagliani's camp are winning: Hudson's town government in September denied the developer's request, saying that changing the rules would be unfair to residents who already had purchased units. In an effort to stave off an appeal by the developer to state officials, residents are hosting open houses and tours for prospective buyers their own age. Ms. Foley says relaxing the rules wouldn't harm the community, but so far, MP has no plans to appeal.

In Century Village, the three-decades-old retirement development in Deerfield Beach, some units are empty because grown children who inherited them can't sell them. Kenneth Barnett, the treasurer for the village management, says often the families don't pay the insurance or the monthly dues, which amount to about $5,000 a year for each unit.

The community is composed of 254 white stucco condominium buildings, nearly all governed by their own board of directors. Those boards are generally allowed to approve sales to people under age 55. Until recently, such sales were almost unheard of. But with two-bedroom condos that would have sold for $120,000 two years ago now as low as $40,000, younger people living in the area are now trying to move in, and are arguing their cases to condo boards.

Martin Cohen, an 88-year-old retired Air Force lieutenant colonel and resident of Century Village, voices common concerns about younger people moving in: "They speed. They use Century Boulevard as a race track," he says. But some buildings have decided they prefer that scenario to empty units.

Roy Landesman, an 89-year-old retired door-hinge salesman from New York, says 10% of the units in his condominium building are vacant. So his building is letting younger families move in; he now has a neighbor in her 20s. Century Village East's Master Management, which maintains the development, including its 16 swimming pools and 765 acres of palm trees and canals, "doesn't like it, but I don't care what they say," Mr. Landesman says.

Donna Capobianco, president of Master Management, says the community is financially viable as it is, and that there are many older retirees who want to move into Century Village, but who are waiting for prices to drop even more.

A 'Natural Way' to Live

Newer retirement communities could go the way of Pine River Village, originally sold as a 55-plus development in Lakewood, N.J. Over the past three years, hundreds of potential buyers had joined the waiting list for Pine River, but by this November, only 32 houses had been sold of the 175 that were planned. The developer, Ralph Zucker, appealed to Pine River's residents a few months ago to agree to let him eliminate age restrictions from the rest of the development, which they did. Now, he is trying to persuade the town to approve the plan.

Lakewood Mayor Raymond Coles says that township officials are sympathetic, but they are trying to sort out whether it's legal to change the zoning because the project is part of a redevelopment zone that specifically called for senior housing.

Residents have spoken up at public meetings in favor of the request. They say they realize that Mr. Zucker can't maintain the development, with its fitness center, indoor pool with a retractable roof, and elaborate landscaping, without monthly dues from more residents. They also worry that unless dozens of houses are built on the vast expanse of cleared land they can see out their windows, their property values could slide; they paid between $350,000 and $700,000 for their houses. Their monthly homeowner's association fees of $260 a month, based on 175 houses, could also climb sharply.

Some are tired of living in a construction zone. Mordechai and Hadassah Goodman moved to Pine River in February after retiring from Chicago to be closer to children and grandchildren. But as the finishing touches were being put on their home, construction in the rest of the community was grinding to a halt.

Their manicured lawn borders acres of plowed-up dirt, cinder-block outlines of future homes, and 9-foot-deep foundations on otherwise vacant lots.

"I was out here playing football with one of the grandchildren -- and kicked the ball right into [an open] basement," says Mr. Goodman, a 71-year-old retired math professor.

To ease residents' concerns, Mr. Zucker has agreed to group younger buyers on one side of the village, create separate entrances, and plant shrubbery -- or even build a fence -- in between, if the plan is approved.

Some of Pine River's residents acknowledge that they're having to adjust their expectations for retirement. Mrs. Goodman, 64, says she's now looking forward to having younger neighbors: "It seems like a more natural way to live."

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