Background: In several OECD countries the percentage of people over 80 in LTC institutions has been declining for more than a decade, despite population ageing. The standard model to explain healthcare utilization, the Andersen model, cannot explain this trend. We extend the Andersen model by including proxies for the relative attractiveness of community living compared to institutional care. Using longitudinal data on long-term care use in the Netherlands from 1996 to 2012, we examine to what extent a decline in institutional care is associated with changes in perceived attractiveness of institutional LTC care compared to community living. Methods: With a Blinder–Oaxaca decomposition regression, we decomposed the difference in admission to LTC institutions between the period 1996–1999 and 2009–2012 into a part that accounts for differences in predictors of the Andersen model and an “unexplained” part, and investigate whether the perceived attractiveness of institutional care reduces the size of the unexplained part. Results: We find that factors related to the perceived attractiveness of institutional care compared to community living explains 12.8% of the unexplained negative time trend in admission rates over the total period (1996–2012), and 19.1–19.2% over shorter time frames. Discussion: Our results show that changes in the perceived attractiveness of institutional LTC may explain part of the decline in demand for institutional care. Our findings imply that policies to encourage community living may have a self-reinforcing effect.