The United States, like the rest of the world, will experience an increasing need in the coming decades for senior housing that is safe, affordable, and accessible. The population of Americans who have reached the age of 65 is growing more quickly than any other age group and is expected to double by 2050.
Most seniors want to age at home. Some will move to retirement villages or assisted-living facilities. Those who are in the worst health may need nursing home care. Seniors suffering from dementia may benefit from the specialized housing provided by a dementia care facility.
Regardless of the housing choice that best suits an older adult’s needs, the senior housing industry learned some lessons from the recent pandemic. How those lessons can be translated into solutions for older adults in need of housing is a question that becomes more pressing every year.
Pandemic Challenges
A joint report by the Urban Land Institute and PricewaterhouseCoopers identifies challenges that had an impact on the senior housing market during the pandemic. At a time when property developers should have been expanding the supply of senior housing, the pandemic forced most older adults to remain in their homes.
The pandemic caused seniors to postpone searches for post-retirement housing alternatives. By the second quarter of 2022, construction of new senior housing units reached the lowest level since 2015. While the pandemic contributed to a reduced demand for new housing, it also increased the cost of supplies and contributed to a labor shortage, factors that discouraged builders.
After quarantines ended, seniors resumed their search for housing. Occupancy rates in senior housing facilities have increased for more than a year. Unfortunately, post-pandemic housing costs have soared. Making senior housing affordable will require a significant expansion of housing that meets the needs of older adults.
The joint report notes that new construction of senior housing “continues to linger at moderate levels.” Construction continues to be hampered by high costs for building materials and labor shortages. Investors are not yet convinced that new construction projects are likely to return a reasonable profit.
Fortunately, a sharp reduction in the inflation rate and strong consumer spending signal a healthy economy. As long as seniors have money to spend, fundamental drivers of the economy dictate that the supply of senior housing will at some point increase to meet a growing demand.
Although analysts expect the housing market to normalize in the next couple of years, affordable housing for seniors may remain in short supply, at least in the short term. While the real estate and construction markets have an incentive to meet a growing demand for senior housing, it will take some time for new senior housing projects to meet the growing demand.
Meeting the Challenge
The joint report suggests that the senior housing industry must respond to the diverse needs of older adults. Some seniors have a strong retirement income and are searching for “ultra-luxury retirement communities” that cater to a comfortable lifestyle. Low-income seniors will make housing choices that are driven by affordability. The “forgotten middle” includes value-minded seniors who will be searching for housing that offers desired amenities at the right price.
Housing options must accommodate the differing activity level of residents. Some housing choices will be suited to active adults who want to maintain community involvement, a healthy lifestyle, and a connection with families and neighbors. Other seniors will be searching for housing that includes suitable care options and meal plans.
As senior housing providers strive to meet market demands that are driven by an aging population, they must understand that they are an important component of America’s health care system. Senior housing operators can help older Americans remain active and engaged. Some housing providers provide care services that help residents manage chronic health conditions. To the extent that housing operators do their job well, older Americans experience fewer hospitalizations and enjoy better physical and mental health.
Meeting Staff Shortages
If the economy remains strong, if labor shortages ease, and if the Fed decides to reduce interest rates for borrowers, the supply of senior housing will increase. Whether housing that offers a care component will increase at the same pace may depend on whether operators can find caregivers to join their staffs.
Solving the caregiver shortage will require a change of attitude. Caregiving is a marginalized profession. It is often misperceived as an unskilled job. Wages are low, hours are demanding, and working conditions can be difficult. These issues lead to rapid employee turnover. Nearly 65% of caregivers quit or were fired in 2021.
Research suggests that a 25% increase in compensation would substantially reduce turnover. Subsidizing that increase with tax breaks might give employers an incentive to pay their caregivers a better wage. Employers are also more likely to retain caregiving employees if they offer the same group health benefits to caregivers that they provide to office staff.
Making caregiver training programs widely available and offering certification of trained caregivers would increase the prestige associated with the profession. Professional certification would also improve the quality of the caregiving workforce. Tuition subsidies or no-interest loans would encourage caregivers to become certified.
Shortages of senior housing and caregiving staff are a vexing problem. Solutions must be prioritized to meet the growing needs of America’s aging population.