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Introduction. Developed countries are currently undergoing demographic changes which entail the rising number of senior citizens. This particular demographic group is prone to suffering from numerous chronic diseases. The link between old age and chronic disease e.g. is illustrated by USA population reference bureau1, according to which up to 19 million people need to provide day-today primary assistance to their elderly family members. There are already a number of technologies in use, including digital devices, smart sensors and intelligent applications that assist elderly people with their everyday needs in their own homes. Developing a strategy for an integrated technological solution would resolve many issues faced by elderly patients and would lead to improving their quality of life, health, and safety. The objectives of COST Action CA 16226, Indoor living improvement: Smart Habitat for the Elderly (Sheld-on), Working Group 3 was: to explore the specific needs of elderly on physical and psychological level; to describe social, economic and technological consequences related to the care of elderly, to specify quality of live concept in context of smart environment; to review policies in different countries; to find good practices examples from different countries, in order to promote safe, comfortable and healthy living at home. WHO5 describes healthy ageing as the process of developing and maintaining functional ability that enables well- being in older age. Functional ability comprises the health related attributes that enable people to be and to do what they have reason to value. It is made up of intrinsic capacity of the individual and relevant environmental characteristics and the interactions between individual and these characteristics. Intrinsic capacity is the composite of all the physical and mental capacities of individual. Environment comprises all factors in the extrinsic world that form the context of an individual’s life (from micro level to macro level). Within these environments are a range of factors, including the built environment, people and their relationships, attitudes and values, health and social policies, the systems that support them, and the services that they implement. We took this explanation of functional capacity of older people as base for WG3 report on the state of the art, where we explored needs of older persons in relation to healthcare and smart living spaces and tried to map existing policies and practices regarding healthcare and smart living spaces in order to propose topics for future studies. Report summarizes research done by WG3 members as well as results of additional search of information related to WG3 objectives.