Senior Housing May Not Be the 'Slam Dunk' Some are Touting

BOSTON-For all the attention the senior housing sector is receiving from investors, there is a downside. So points out Meghan Gorman of locally based Torto Wheaton Research. The senior research analyst says that while the sector may be a higher-yielding alternative to multifamily investment and can profit from the aging baby boom population, there are certain segments of the market that are riskier than others. Namely, traditional nursing home facilities have increased risk profiles, she maintains. These challenges, Gorman says, are “enhanced by the flipside of the demographic equation; namely, the strain put on Medicaid programs by a shrinking labor force.”

Looking at the numbers alone, the investment potential for seniors housing product is compelling–the US Census Bureau expects those over age 65 to increase in number from 35 million in 2000 to more than 86.7 million by 2050. The population of those over 86.7 will nearly quintuple to 20.9 million over that same period.

According to Gorman, “One of the most salient threats to traditional senior housing product is the increasing preference among seniors to age in place.” As such, there has been a shift toward in-place care in both the private and public sectors, the latter being federally financed with such programs as Medicaid and the Program for All-Inclusive Care for the Elderly (PACE). The rise of such options as continuing care retirement communities, traditional retirement communities and inner-city home health services, as well as state programs including HCBS waivers and HUD affordable assisted living grants, as also added pressure on the institutionalized senior living space.These factors, along with the belief that seniors should live independently as long as possible, poses a challenge to developing mixed independent and assisted living facilities, since seniors in independent living “would prefer not to see closely located assisted living facilities as their next step.”