Analysts Predict that Senior Housing Industry Will Act to Meet Housing Shortage

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Based on census data, the National Investment Center for Seniors Housing and Care (NIC) estimates that by 2026, the United States will have one million additional households with a member who has reached the age of 80. Another two million 80+ households are expected by 2029.

The NIC projects that the Southwest, the mid-Atlantic, and the Mountain regions will experience the largest growth in 80+ households. The Northeast will likely experience the smallest growth. Every region will nevertheless see significant growth in the senior population and the number of 80+ households.

Supply and Demand Trends for Senior Housing

While many older adults want to age in place in their existing housing, the burden of home maintenance or a developing need for caregiver assistance often encourages seniors to move to retirement communities or assisted-living facilities. As the Baby Boomer generation continues to age, analysts have predicted a shortfall of housing options that are specific to the needs of older adults.

The housing industry’s response to that shortfall was hampered by the pandemic. Fewer seniors were in a position to move to new locations before vaccines became available. The construction industry placed a hold on existing projects and delayed the implementation of new senior housing developments.

As concerns about the pandemic have eased, the demand for senior housing options has increased. The existing supply of senior housing is reaching pre-pandemic occupancy levels. Analysts see a clear need for new construction so that supply will catch up to demand.

The NIC expects demand to be highest in the assisted-living and memory care segments of the senior housing market. Unfortunately, new construction starts did not keep pace with demand in 2023, in part because efforts to control inflation have increased the cost of borrowing. Only about 40% of increased demand for senior housing is currently on pace to be fulfilled.

Hope for the Future

The NIC predicts that rising demand for senior housing, particularly assisted-living and memory care facilities, will be the new normal. Existing properties are likely to be fully occupied by 2026. The question is whether the senior housing market will construct new units quickly enough to assure that seniors have housing solutions — particularly those who are need the assistance of caregivers.

About three quarters of senior housing construction projects that have already been started will be finished by the end of 2024. Analysts expect a gap between the completion of existing projects and a significant increase in new construction starts. In the short term, seniors might be challenged to find the right place to live in a tight housing market.

While the future is unclear, some developers will probably wait for interest rates to fall as others move forward to meet a growing demand. From the time a project breaks ground, it generally takes about three years before a senior housing facility is ready to be occupied. There is reason to hope that developers will realize that now is the time to start building. The NIC is cautiously optimistic that rising demand will trigger a “fear of missing out.” Seniors can hope that developers will see the advantage of moving quickly to meet an obvious need for senior housing that will only grow over the next two decades.

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