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About the industry

Senior housing overview

With millions of people already categorized as older adults, and millions more on the way, a key question is: where will they all live? For many, housing geared towards the older adult is the answer.

The term “seniors housing” encompasses all types of living situations: single homes, town homes, apartments, condominiums, single rooms, manufactured housing (mobile homes) and motor homes. Any combination of these owned or rented housing units can compose a community for older adults. Because of the variety of housing, older adults at lower, midlevel and higher incomes can find an option.

A seniors community can be planned to accommodate adults 55 and older, or occur naturally as older adults seek similar lifestyles (for example, in areas of Florida and Arizona). Some naturally-developing older adult communities occur simply because residents age in their own homes, thus changing the demographic of a neighborhood.

While effective marketing to older adults is geared toward needs and interests, not chronological age, the exception is the entry point to seniors housing. Housing is:

• Age-restricted or age-qualified for those 55 years and older. One person must be in this age group and generally younger inhabitants are not allowed.

• Age-targeted to those 55 years or older. These residences attract people over 55 years, and may require one person age 55 or older, but also allow flexibility when, for example, the kids move back in for a year or two after college.

According to information collected in the American Housing Survey (2001) on households ages 55 and older that was analyzed by the National Association of Home Builders (NAHB):

• 1,800,000 households live in age-restricted communities (single family and multifamily), with 41% owner-occupied
• 400,000 households live in manufactured (mobile) homes in age-restricted communities
• 7,584,000 households live in unrestricted communities, where most residents are 55+, with 83% owner-occupied
• 600,000 households live in “other” seniors communities

Builders evenly divided these categories in 2003, with 57% of builders planning age-targeted communities and 58% planning age-restricted housing, according to NAHB.

The types of seniors housing are organized by the functional capacity and lifestyles of their residents. In this Active Aging in America report, the seniors housing options are in two broad categories:

1. Independent living housing

• Planned active adult communities
• Independent living and seniors apartments

2. Assisted living housing

• Continuing care retirement communities (independent living, assisted living and nursing on a single campus)
• Assisted-living residences
• Nursing homes or long-term care facilities

These categories encompass housing that can be rented or owned. Just as the types of housing targeted to older adults are diverse, so are the definitions of what is included in these communities (particularly “independent living”). Varying definitions mean that statistics include noncomparable types of housing. However, these categories are representative of terms currently being used. (These groupings exclude private homes and small board and care homes).

Seniors housing has two stages: new construction or renovation, and property management and upkeep. Real estate transactions occur during both phases.

An older adult’s choice of residence depends on level of function, financial capability, level of family or community support, personal and business interests and social connections. Not only does an older adult have choices in housing, the options in each segment are competitive with builders and managers seeking the same buyer or renter.

The buying decision for seniors housing isn’t necessarily exclusive to the prospective resident. Over three-fourths of the adult children whose older relative resided in seniors housing or long-term care were involved in the decision, according to National Investment Center for the Seniors Housing & Care Industries (NIC). This is an important consideration since 98% of 50+ adults in an AARP survey are aware that getting enough exercise is important. In another survey of Baby Boomers ages 44 to 56 years who are interested in active adult communities, 88% said they would be happier in retirement if they remain physically active.

To appeal to Baby Boomers as well as their older relatives, many builders are including a fitness center in new projects. A survey of builders of 50+ communities found that a fitness center was included by 60% of builders in the Northeast, South and West and by 45% in the Midwest. Recreation centers, community centers or clubhouses were included by 74% of builders in the South and 47% in the Midwest.

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Industry forecast

Housing in general remains a strong force in the economy. According to a report from the Joint Center for Housing Studies of Harvard University, “Several forces bode well for housing investment over the next 10 years, including higher-than-expected household growth, the aging of the Baby Boomers into their peak income and wealth years, and the backfilling of the baby bust generation through immigration.”

Demographics are driving builders to focus on housing for older adults. In fact, the fastest growing segment of the housing industry is the 50+ market. People over 50 years are likely to buy over 25% of the 1.2 million new homes projected to be built in 2005, according to NAHB. In 2003, 57% of builders planned to build age-targeted communities, 58% planned age-restricted and 35% independent living communities.

According to the NIC, the market capitalization for professionally managed, investment quality seniors housing was $236 billion in 2004. This is an increase of 15% since 1997. NIC believes the capitalization level is the result of increasing revenues per unit occupied. NIC estimates there are 33,000 professionally managed, market-rate facilities with supportive services (independent living, assisted living, nursing homes and continuing care retirement communities) providing capacity for 3,675,000 older adults.

At the end of the 1990s and into the early 2000s, there was an oversupply in the seniors housing industry. However, current NIC data indicates median occupancy rates of 91% for continuing care, 92% for independent living, 89% for assisted living, and 87% for nursing homes in the second quarter of 2005. These occupancies rates help fuel new construction or upgrades.

High levels of occupancy are meaningful in the context of resident turnover rates: 30% for independent living and 50% for assisted living. Every seniors housing type needs to sell or rent the unit when a resident leaves. This is a driver to included services and amenities that attract and retain new occupants. Facilities for active aging are in demand, particularly among younger buyers.

Another driver comes from the personnel side. An issue faced by companies offering rehabilitation services is the supply of physical therapists and occupational therapists licensed to provide therapeutic exercise. When there is a shortage of therapists, an emphasis on physical activity and wellness (with trained instructors and personal trainers who are qualified to work with average healthy adults) is a cost-effective preventive measure.

Overall, the outlook for housing in general and residences targeted or restricted to older adults is positive and predicted to grow.

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Sources

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