Housing Wealth and Age Care: Asset Based Welfare in Practice

Population ageing and the fiscal pressures it is causing has motivated governments to shift the responsibility for the financing of age care to the individual. In this paper we consider policy initiatives that include older owner occupiers’ housing wealth and imputed rental incomes in means tests that determine user charges for residential age care.We begin by describing the motivation behind policy initiatives of this kind, before describing how housing wealth is included in residential age care asset and income tests applied in three OECD countries - Australia, the Netherlands and Great Britain. The paper proceeds to analyse the possible distributional implications of these differences, with particular attention to income poor, elderly households. It also takes a life cycle perspective by evaluating the likely impacts of different means test arrangements on the accumulation of wealth by households. Finally the paper outlines the consequences of different means test arrangements for bequests.