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Excess capacity in senior housing -- why won't consumers move in?
Fri, 08/14/2015 - 10:59 - Laurie Orlov
Builders like to build – and investors like it too. Does it surprise anyone that there may turn out to be unoccupied senior housing units in the future? That the supply may have been overbuilt for the level of future baby boomer enthusiasm for this type of housing? "The occupancy rate for all senior housing in 31 major markets fell this spring for the second consecutive quarter." And shares "have tumbled down" in the real estate companies that, interestingly, continue to build. So what’s going on? Certainly, the old refrain of '10,000 baby boomers turning 65 every day' (beginning in 2011) has not proven to be a market strategy.
Why won’t they move in to senior housing? For one thing, the average move-in age in the mid-80s represents a distant day for the 10,000. They are staying in their current home at 65 – perhaps near their friends and families -- many still working, not planning to retire then, and one in five, not retire at all. So assuming they retire, where will they want to go? Actually, for the most part, nowhere. Maybe they’ll renovate, maybe not. But for those who move to let’s say to warmer climes, perhaps they will be among the 5% that move to the 'active adult' 55+ housing comprised of condominiums, homes and recreation. What they are not filled with are jobs for retirees.
Is money the real issue with senior housing occupancy? So what keeps the move-in date late in senior housing and the 55+ population at such a small percentage? Not enough money saved is a barrier, for sure. Behind small nest eggs lurks the likelihood that life expectancy will outpace savings – even without the monthly costs associated with CCRCs, assisted living, or 55+ communities. Perhaps people look around their homes and neighborhoods where they worked and lived – and decide that it’s just too much to downsize and move – until the adult children insist – and it is a necessity.
Does the senior housing lifestyle hide limitations not visible on the tour? More self-examination in the senior housing industry would be illuminating. Besides a population not ready to move in, maybe excess capacity is related to other concerns at the entry point as well. Independent living and 55+ attract people for whom their own homes have become a burden. But perhaps they encounter new limitations -- one resident told me recently that it hadn’t occurred to ask about tech support, inadequate WiFi access and the community’s disinterest in sharing information online. Maybe the absence of children and teens is a positive – or maybe it looks too monochromatic for others. Anyway it is sliced, the industry should examine the 'why' and not just the 'what.'
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Comments
From LinkedIn - Missing inter-generational
A friend of mine who moved to a CCRC last year refers to it as "the reservation". He has made some wonderful new friends but really misses the inter-generational connections from the old neighborhood. Without that connection, he feels much closer to death. So his solution is to get off the reservation as much as possible - but not during meal time.
Gary Hughes
From LinkedIn: Costs are too high
Either the costs are too high or the food/isolation/unlikable members/transportation/nearby excellent hospital/specialty physicians/size of room and bathroom/old construction/lack of modern technology/no pool table (and other favorites), etc. will all contribute to a loss of interest in joining any particular senior housing community..
From my contacts who have joined a senior housing group, I hear many complaints which will leave some senior housing with few members. My question has always been about the costs. Why are they so high? Middle-class people who have to sell a house and sign everything over to the facility are complaining about the amenities they have had to trade to join a group of people who they wouldn't ever have chosen as friends.
I read the contracts for two senior housing communities. What one has to give up is comparable to being incarcerated. Their choices are none but what the owners have outlined and the rules can be changed at the whim of any new owner. I understand about golf communities or other focus activity which creates the desire to join, but if the focus changes, most will want to move. The members don't have the initial costs to move and the morale is terrible.
I believe there will be a lot of senior housing projects which will be for sale and the members who are still there will be at a loss to find other housing. What will be available at a reasonable cost as an alternative group membership? And what will the old buildings be sold for? Probably public housing for special groups, as in halfway houses for those out of prison or youth offenders..
So, I do see problems with over-building, but for different reasons than other comments will mention.
Marjorie Bard, Ph.D.