Beth Burnham Mace
ANNAPOLIS, MD—Fewer than half (46%) of America's middle-income seniors will be able to afford the $60,000 average annual costs of seniors housing and out-of-pocket medical costs in 2029, new research conducted by NORC at the University of Chicago, shows. However, an additional 5.9 million older adults could afford senior housing if annual costs were cut by $15,000. Also, if average annual costs for seniors housing and care fell by just $10,000 a year, an additional 2.3 million older Americans could also afford it.
“Today's housing stock simply cannot accommodate the influx of middle-income seniors projected to need senior housing and care within 10 years,” says Beth Burnham Mace, chief economist at the National Investment Center for Seniors Housing and Care (NIC), which supported the study. “Making seniors housing accessible to more middle-income seniors in the next decade requires innovation by real estate developers, owners, operators and investors to create and deliver affordable, quality options,” she tells GlobeSt.com.
The market is now seeing an evolution in senior housing from highly-amenitized products to very basic housing. For example, shared units may become more economical than the currently popular single units. Or, sharing a bathroom or a kitchen may also lower a senior's overall housing cost. There may also be changes in construction designs where there may be smaller units but larger common areas where more socialization can occur. The report notes isolation can lead to depression.
In order to afford long-term care, researchers say many middle-income seniors may be forced to rapidly spend-down their assets to levels where they qualify for Medicaid. For seniors with very low incomes, Medicaid covers housing only in skilled nursing facilities, and sometimes covers long-term services and supports provided in homes, often by family caregivers. Those with ample assets pay for seniors housing out-of-pocket with a small percentage utilizing long-term care insurance to defray the costs.
According to NIC, it will take 17 years at today's construction rate to build the 750,000 additional seniors housing units needed to serve the middle-income market. Middle-income, for the purposes of this study, are people 75 years and older with annual financial resources of approximately $25,000–$95,000. The report states older adults, a decade from now, will also face more challenges with managing more chronic conditions, experiencing significant cognitive impairment and mobility.
“We don't have the secret sauce for the solution but we are actively working on it,” says Mace.
“On the financial side, there are hopefully pools of capital in some social responsibility buckets. The ROI may not be as high as developers may prefer but some investors may still want to satisfy their social and fiduciary responsibilities. We hope that happens.”
Over the next 5-10 years, various financial and operating models will have to be tested and successful. Once models are verified, more capital will be injected, according to Mace.
The report explains the private sector can pursue strategies such as subsidizing 'middle-market' residents with higher-paying residents; adapting existing properties, like malls, for new uses; developing new pools of investors and capital providers; developing innovative real estate financing models; and other options.
“If the private sector doesn't take care of it, the public sector will have to handle it. Medicaid only has so many dollars. This is not only a senior housing issue, it's a social issue,” observes Mace.
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