Seniors Rise, Housing Cools
By Scott Beyer
The senior housing market is going in two directions right now. The number of seniors has increased and will continue to, with the demographic group projected to more than double from 46 million today to 98 million by 2060. A Census report predicts that by 2035, “there will be 78 million people 65 years and older compared to 76.4 million under the age of 18,” marking a radical shift in American society.
But the market for senior housing is cool. In the summer of 2018, senior housing occupancy reached its lowest level in eight years. Things have remained like this well into 2019.
“Senior housing occupancy was 88.1 percent for the first quarter of this year, up 0.1 percentage points from the previous quarter’s total,” wrote Tim Regan in April in Senior Housing News. “And construction starts appear to be slowing, suggesting an ongoing cooldown in new supply.”
Last year, the National Investment Center reported even lower occupancy rates for assisted living, which fell to 85.7 percent, the lowest since the agency began keeping data in 2006.
The reason for the dip, according to industry experts, speaks both to temporary market cycles and larger trends. The temporary market cycle factor is that there is simply a glut of senior housing. The industry, led by national brands like Sunrise Senior Living and Brookdale Senior Living, has built a bunch of campuses to anticipate the growth of the senior population, with 16,680 new units entering the pipeline in the 31 primary markets in 2018. But Americans simply have not grown old, or in immediate need of specialized retirement living, at the rate providers anticipated, said Tim Mullaney, editor of Senior Housing News. So there’s a lot of excess inventory.
“The oldest Boomers today are only in their mid-70s, and so the Boomers are still several years away from entering senior housing communities in large numbers,” wrote Mullaney. “In the meantime—with an eye on the demographics—developers and investors have been very active in building senior living communities in certain markets, leading to oversupply in some areas.”
But the broader trend may be that there’s not as much demand as the industry thinks for senior living facilities, which in the U.S. are often built on suburban-style campuses that are isolated from the larger community. Instead, seniors want to “age in place” – purchasing various home repairs and on-demand services that prevent them from needing to move. According to a 2014 AARP survey, 71 percent of people over 50 said they’d rather age in their current homes. And various changes within government, business and demographics could make their dream possible.
Let’s start with federal and state governments, which have done a laudable job of recognizing this shift. Many Medicare Advantage plans include reimbursement for in-home services or modifications, like adult daycare and bathroom grab bars and ramps. The Affordable Care Act created a Medicaid program called Community First Choice, which allocates money to states who encourage home- and community-based services (HCBS) for Medicaid beneficiaries. This includes in-house support for things like bathing, eating, cooking and medication. Several years in, Community First Choice had been adopted by eight states, helped 5 million people, and increased the funding for HCBS by 21 percent. Home healthcare is projected to rise from there, with growth in industry employment expected at 54 percent by 2026, compared to the seven percent average employment growth expected across all other industries.
Other business and technology sectors, not directly related to health, also must respond to the aging in place trend. For example, “Only one percent of housing stock is currently equipped with no-step entrances, single-floor living, wide halls and doorways to allow a wheelchair, electrical controls reachable from a wheelchair, and lever-style handles on faucets and doors,” writes journalist Mimi Kirk, in Citylab.
There will be a large demand for these fixes, and other in-home devices, such as elevators, virtual assistants and robotic vacuum cleaners. America may also see the rise of home extensions, as elderly parents move back in with their children. For this reason, the National Association of Homebuilders has a Certified Aging-In-Place Specialist program for remodelers. And the National Aging in Place Council has partnered with Stony Brook University to train social workers to be aging in place specialists, and guide seniors to the local in-home services they need.
But it’s not just housing. The growth of on-demand services, from personal delivery to in-home food preparation to transportation rideshare, will make it easier for the elderly to live alone, without the need for the constant on-site assistance provided by institutional retirement communities.
And this will likely be made possible by the demographic shifts happening in the senior population, namely the move to cities and suburbs. Census figures compiled between 2000 and 2010 show that seniors were likelier to move away from parts of rural America—particularly in the Great Plains and Midwest—and into Southern and coastal metros. This will put them closer to the on-demand networks mentioned above; while seniors who settle in America’s densest cores will literally be able to walk to most of their daily needs. For this reason, said Mullaney, there’s now a lot of senior living facilities going up in cities, such as Watermark, the former Jehovah’s Witness building that was converted into a 273-unit retirement community in Brooklyn Heights.
Perhaps the biggest cause behind this aging in place shift, though, is that retirement communities are just expensive. According to a cost of care survey published by the insurance company Genworth, the average yearly price of a private unit in an assisted living community ranges between $30,000 and $80,000. Sunbelt states tend to be on the low end of that spectrum, perhaps explaining why retirees move there; while northeastern states are overwhelmingly on the high end, with DC topping the list. But in reality, senior assisted living isn’t cheap anywhere, and the more seniors who do it, the bigger burden there will be on American taxpayers, families and retirees themselves. Aging in place thus looks like a cost-effective way to help retired people, and could be the mainstream future of senior living – even if that means a perpetual cooling off or locational shift within the senior housing market.