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The industry that brought you the 55+ senior housing development and the Continuing Care Retirement Community (CCRC) is having its problems. That may be to our advantage.
Demography isn’t one of those problems. Between Baby Boomers and Millennials, there are more older adults than ever in the prospect pool for senior housing. What is a problem is that 86% of older adults can’t afford what’s on the market today. Not only that, most older adults don’t even want the product. For the 75% of adults age 50 or older who prefer to live their remaining lives in their own home, a senior housing community is the option of last resort. (Moreover, technology advances now make it more possible than ever to stay in your own home longer.)
The senior housing sector took a big hit during the Covid-19 pandemic. Fear of infection, high mortality rates in Nursing homes and memory care facilities, and lockdowns sent demand tumbling. Occupancy rates returned to pre-pandemic levels only last year. With millions more baby boomers Aging into the prospective market for housing, you might expect the industry to build more capacity. But that is not happening. At current development rates, only one-third of the projected 560,000 new units needed by 2030 are in the pipeline.
Investors are backing away from new projects for several reasons. Costs are higher because of high interest rates (thanks in part to inflation), higher materials costs (thanks in part to tariffs), and labor shortages (likely to get worse thanks to deportation policies). “It doesn’t make sense today to put shovels in the ground except for a handful of top-tier deals,” David Selznick, chief investment officer of Kayne Anderson Real Estate, told the Wall Street Journal.
Whatever does get built over the next five years is going to be targeted to the most affluent customers, who can afford the higher price tags. The lack of options for middle-income households, already a major gap in the market, is likely to widen further.
And then, as noted, there remains the fact that most older adults don’t particularly care for the options now on offer.
Industry pessimists read these signals as reason for caution. Industry optimists view the same signals as an opportunity for creative solutions. “This moment is made-to-order for Innovation,” writes industry pro Robert Kramer. “It’s the perfect time to figure out new ways of delivering our services and trying new models.”
Kramer suggests the industry needs to develop new models that can be scaled up:
Middle-market models that wrap around supportive services.
“Active adult” models that focus on Lifestyle, wellness, and longer Health span.
Community-based models organized around wellness clubs, membership programs, and comprehensive medical and social services.
Models for delivering services into the home.
Joseph Coughlin, who directs the AgeLab at the Massachusetts Institute of Technology, sees the moment as an opportunity for the industry to reposition from the choice of last resort to “an aspirational lifestyle choice.” That means, he writes, “senior housing must shift from being seen solely as a care provider to an aspiration in the public’s mind.” Among the necessary changes are building in the tech infrastructure that older adults expect, considering the preferences of residents’ adult children, and meeting market diversity with “multilingual staff, culturally diverse dining options, and design elements that reflect various cultural preferences.”
People have talked for years about creating alternatives to the massive dormitory-style warehouses that are the predominant choice today. But this time it may really happen. Here are some of the big ideas floating in the ether:
Cottages with courtyards and pocket neighborhoods that create community are designs that resonate with older adults, says Alexandra Vondeling, senior associate at an architecture firm specializing in middle-income housing.
Senior living operators are adding 5 to 50 “hybrid homes” to their campuses to increase independent living units without committing to massive new construction. Operators report these units are attracting younger, more active residents.
Another variation is building new hybrid units around a shared social space. Matt Thornhill’s Cozy Homes, for example, arranges single-story duplexes in oval clusters around a central common house or pavilion.
Multigenerational developments break from the normal pattern of seniors-only housing. One way is incorporating popular vendors (Starbucks, for instance) into the development to encourage young people to interact with older residents. Others include shared dining and fitness spaces, onsite classrooms, walking and bicycling paths linking the campus to downtown, and internships for college students.
Housing oriented around lifestyles, such as LGBTQ+ residents or environmental stewards, is another way operators are appealing to new groups of adults. This category also includes Latitude Margaritaville for those seeking a freewheeling party lifestyle, and StoryLiving by Disney for those who aspire to dwell in Fantasyland.
Bob Kramer adds another important thought: Changing the trajectory of senior living is not solely the responsibility of the industry. “We need older adults themselves to take a lead role,” he writes. It means shifting the conversation from what the industry can do for and to older adults, to discussing what can be done by and with older adults.
In short, we need to do more than vote with our feet. We need to tell the senior housing industry what kind of communities we want to live in during our final chapters.
