Maybe too proud to live in such a place.
I'm sure there's resentment that the family doesn't seem to want him so he's relegated to a shack behind the niece's house. His brother and his family treat him like excrement, he knows it and rubs their faces in it. The niece's family may be worse, as the children disrespect him and the parents let them. He may be living with them but he is still isolated. Yet he prefers that to living in any assisted living facility because he is proud. That shack he lives in is his and allows him to be independent.
I'm sure he also gives the niece rent because he won't take charity. But aside from groceries and his booze he doesn't have much in the way of expenses. So that allows him to bank the excess of his retirement checks for this splurge. I have no doubt he could have bought that Ferrari outright if he had to. He probably banked a lot of his pay while he was active duty too.
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