Part 2 of 2

SAN DIEGO—Predicting what type of living arrangements seniors will seek out as they age and all of the related factors is a challenging task, Pathfinder Partners' senior managing director and co-founder Lorne Polger tells GlobeSt.com. In part 1 of this two-part exclusive feature, we explored the growth of the senior-housing market, how it compares to the general housing market and housing options for seniors. In part 2, Polger discusses the trends in senior living and key factors leading to the upswing in senior-housing development.

GlobeSt.com: What type of living arrangements will seniors seek out as they age?

Polger: Predicting what type of living arrangements seniors will seek out as they age and when they may need senior housing—particularly given longer life spans and changing attitudes about such types of housing—is a challenging task. The options are varied, both in terms of amenities and expense levels.

A common and appealing senior housing option is staying in the home. Certainly from an emotional standpoint, staying in your home may be the most comfortable alternative. Yet, while on the surface this may make the most economic sense, there are physical, emotional and potential economic pitfalls. Do they have the ability and economic wherewithal to maintain and adapt their residence? While certain things can be changed at minimal cost (tub access, grab handles, etc.), other elements (e.g., stairs) may be more difficult or costly to adapt. Do they have the ability or desire to continue to prepare their own meals? Do they need some assistance in the home? Although assistance in the home is readily available from various agencies, the costs of hiring home help can be exorbitant.

Another option is independent living—also known as retirement communities, congregate care, retirement villages, 55-plus communities, senior apartments and continuing-care retirement communities—which caters to those who are generally healthy and remain independent. Typically, residents live in fully equipped private apartments or casitas. Dining services are generally offered and residents can typically choose to pay for a specified number of meals per day. Transportation and housekeeping services are available, and amenities include cultural, educational and entertainment programming. Financially, there are generally three types of programs available: direct ownership of a residence, a buy-in program with a percentage rebate upon transfer or death and pure rental. In the first two cases, there are typically large homeowners' association fees. In all three situations, housing costs are covered privately, and although there are some government-funded programs, options are limited.

There is a vast price difference among independent-living communities. In San Diego, for example, the median monthly rent in coastal areas for a couple ranges from $4,000 to $10,000—not an insignificant amount for those on a fixed income, especially since they will also have other monthly expenses that will need to be covered (medical, insurance, auto, entertainment, travel, etc.).

Assisted-living communities are designed for those who are no longer able to live on their own, but do not require the high level of care provided in a nursing home. Assistance with medications, activities of daily living, meals and housekeeping are routinely provided. Residents live in private apartments, which frequently have a limited kitchen area. Most provide licensed nursing services and social activities, and scheduled transportation is often available. A special memory care or Alzheimer's unit is offered in some, but not all communities.

Financially, this is mostly private pay, although some take Medicaid. Given the additional care, the cost of assisted-living communities is generally greater than that of an independent-living community.

For those who are completely unable to care for themselves, nursing homes—also known as convalescent care, nursing centers, skilled nursing and long-term care facilities—provide around-the-clock, skilled care with a high level of medical and skilled nursing care and assistance. Many nursing homes now provide short-term rehabilitative stays for those recovering from an injury, illness or surgery. Residents typically share a room and are served meals in a central dining area unless they are too ill to participate. Some facilities have a separate unit for memory care or Alzheimer's residents. Payment sources include private pay, private long-term care insurance, Medicare and Medicaid. Not surprisingly, given the added care elements, the cost of nursing homes is generally greater than that of independent-living and assisted-living communities.

GlobeSt.com: What are other trends you see in the senior-housing sector?

Polger: In addition to folks living longer and staying in their homes longer, another key trend is continuity of care. An increasing number of facilities now offer care throughout the spectrum, so that a resident can "age in place" (i.e., transition from independent living to assisted living to possibly nursing care or memory care, all within the same facility so that they have minimal disruptions both physically and socially during the transition periods).

GlobeSt.com: With the numbers of seniors increasing, along with the costs, do you see problems on the horizon?

Polger:The cost of all senior-housing options is high—and rising. Clearly, a significant portion of the aging population will not have the financial means to meet these costs. Is this a looming crisis? Possibly. Have we properly planned for it? Probably not. That will likely be more fodder for the elections of 2020 and beyond, but it's certainly not too early to start talking about it with your parents and grandparents, and to begin planning for it.

GlobeSt.com: Do you have any input for investors?

Polger:Most trends and demographics suggest that senior housing—a potentially lucrative asset class that impacts society overall—may be an attractive long-term real estate sector play. But like all sectors, you have to watch for supply/demand imbalances. We tend to overbuild across all sectors when times are good. As evolving demographics drive new senior-housing construction, understanding specific submarket demand will likely impact returns.