Financing long-term care in Portugal: Is there a role for home equity release schemes?

Abstract

Long-term care (LTC) needs are high in Portugal and in EU countries and tend to be concentrated among vulnerable populations. Despite public support, particularly for people with more severe needs, out-of-pocket costs with LTC remain high, and the social protection gaps may push older people into income poverty. Reforming LTC schemes to cope with increasing demand due to population ageing, protection gaps, fiscal sustainability, and intergenerational fairness is a significant challenge that many countries face. In an asset-based approach to welfare in which individuals accept greater responsibility for their welfare needs, policy solutions for balancing affordability for users and fiscal sustainability should not ignore the role of home equity release schemes (ERS). This paper investigates the role of ERS in the financing of LTC in Portugal. Using data from the Eurosystem Household Finance and Consumption Survey (HFCS), we analyse household wealth distribution, breakdown home equity estimates by socioeconomic group, and estimate the potential for income release from monetising home wealth through ERS mechanisms such as reverse mortgages and home reversion schemes. The empirical findings suggest that homeowners may tap into their accumulated home wealth to finance LTC costs, smooth consumption, and increase their resilience against financial shocks.