Senior Housing on Track for a $275B Investment Shortage

There’s a growing gap in senior housing that is on track to lead to a $275 billion investment shortage by 2030, according to a report from NIC MAP Vision, a provider of data and analytics for the industry.

New senior housing starts have plummeted to just 0.2 percent of the existing inventory, the lowest level in recent history, the firm said. To meet the projected needs over the next six years, development must accelerate to more than 3.5 times the current pace. With only 26,000 units being developed annually compared to the highest rate of 56,000 units in the 21st century, the industry is on track to fall 50 percent short of the required inventory by 2025. Only a quarter of necessary units have been developed so far.

“We are critically behind in taking care of our aging population,” said Arick Morton, NIC MAP Vision Chief Executive Officer, in prepared remarks. “We’re already seeing the early stages of this incredible demand growth that will continue non-stop for the next 25 years and beyond. We simply don’t have enough senior housing inventory in the pipeline, so we must act now to develop senior housing to help meet this demand.”

Demand is indeed surging in this space, driven by the aging population that “significantly exceeds the growth of housing inventory” as the oldest of the baby boomers turns 80 in 2025. Additionally, senior housing continues to see historic absorption rates as the net change in occupied units continues to rise, it said. In 2024 Q1, the absorption rate was 40% higher than the same period in 2023, “which was a historic number in its own right.”

This includes a recovery from the Covid pandemic, where conditions created increased shortages when in the first quarter of 2021, there was negative absorption of 16,260 units.

Entering 2024, occupancy and aggregate employment are within 1-2% of pre-Covid levels, and the capital markets show signs of life as the Fed telegraphs a coming rate-cutting cycle, it said.  “Employment levels exceed pre-Covid levels, further underlining a recovery phase that is expected to continue. Within the industry, rents are rising while operating expenses and inflation are moderating, leading to profit margins,” according to the report.

Last year saw absorption rates that were double “any pre-pandemic four-quarter period, indicating robust demand.” Sequential occupancy net absorption and growth have hit historical levels. That’s even before the major aging demographics settle in. Even in 2022, the 80+ population began to exceed inventory growth.