A recent study has identified a sizeable market of middle-income seniors in need of affordable seniors housing, a population that will skyrocket to 14.4 million by 2029. This demand segment is defined by seniors who will not qualify for long-term Medicaid care, but cannot afford to move into seniors housing on their own.
The study was conducted by researchers at NORC at the University of Chicago, with funding provided by the National Investment Center for Seniors Housing & Care (NIC), and additional support from AARP, the AARP Foundation, the John A. Hartford Foundation, and The SCAN Foundation. Beth Burnham Mace, NIC’s chief economist, stressed the importance of this population for current and future investors in the seniors housing sector.
Here are five takeaways from the report:
- The privately-operated seniors housing sector has focused too much on high-income seniors at its facilities. Currently, seniors housing is out of reach for eight million of America’s middle-income seniors, a figure that is projected to almost double in a decade’s time.
- By 2029, a projected 81 percent of seniors with no ability to tap into housing equity will have $60,000 or less in annual income and other annualized assets—below what will likely be the average assisted living rental rate of $62,000 a year. Even among middle-income seniors with access to housing equity, 54 percent will have annual income of or below $60,000. The gap will be particularly pronounced among seniors between the ages of 75 and 84 years of age
- Even if 46 percent of seniors will [theoretically] be able to afford seniors housing, this projection assumes that these seniors will be willing to draw down on their assets completely and forego nest eggs. Most individuals greatly fear outliving their assets, so this 46 percent figure of seniors who will be able to afford seniors housing on their own is likely exaggerated and only accounts for those willing to be financially depleted by living in seniors housing facilities.
- The study, which also looks at overall demographics in the sector, found that the type of tenants coming into seniors housing is diversifying. The share of women living in seniors housing facilities is projected to increase from 56 percent today to 58 percent in 2029. Additionally, a greater number of individuals entering seniors housing will not be married and will have fewer children than in years past. As a result, these seniors will have fewer children/family members offering them additional assistance and will likely rely more on seniors housing staff. A reduction in the number of family caregivers places greater burden on those remaining, and some seniors may not have unpaid care options available to them.
- These factors will create a significant unmet need in the seniors housing sector going forward. It is still unclear what the solutions may be, but potential options may include private investor pools interested in pursuing socially responsible investments with a suitable risk profile. Other solutions may involve a la carte pricing models for seniors housing and care to create more flexibility for some residents, offering less expensive housing options with fewer expensive services and private sector investors being willing to accept lower returns by charging less in rent.