Booming Business Opportunity
By Keith Loria, Contributing Editor
The 65-plus population in the United States, which measured about 40.3 million in 2010, is expected to reach 54.8 million by the end of this decade. That’s a 36 percent growth, propelled by the fact that 40 million baby boomers will turn 65 in this time.
According to “Housing in America: The Baby Boomers Turn 65,” a new report released this fall by The Urban Land Institute, the combination of aging baby boomers and those a bit older has created a variety of market segments and it is posing new opportunities and challenges for the housing industry. The report highlights the Leading Edge Boomers (born between 1943-1954), the Silent Generation (aged 67 to 85) and the Greatest Generation (aged 85 and older).
“The 65-plus age group is the fastest growing age group in the United States and will be for the rest of this decade, as the rate of growth for that group is accelerating,” says John McIlwain, ULI’s senior resident fellow for housing and author of the report. “Over the last two decades, unprecedented change has occurred, and today three separate generations are over 65, each with its own outlook on life and distinct housing needs that are unlike those of past markets for people in their age group.”
The nation’s approximately 50,000 housing communities for seniors, which includes those providing independent, assisted living and/or full nursing care, are on the decline, according to the report.
“The combination of the Leading-Edge Boomers reaching 65 with expectations of a longer life than ever before, and the fact that many of the Silent and Greatest generations are running through their limited retirement savings—combined with a continuing reduction in federal and state resources for housing subsidies, is leading to a coming crisis in U.S. housing for those over 65,” McIlwain says. “There is no longer a ‘senior generation.’”
Dissecting the different generations
The Leading-Edge Boomers are really the future of the 65-plus population, according to the report, which shows that a majority of them want to age in their current homes, even when they need assistance to do so.
“Leading-Edge Boomers will not settle gracefully into quiet retirement and move into traditional seniors housing communities for years, if they ever do,” McIlwain says.
Currently, more than half of Americans over 65 live in suburbs. Some of this has to do with seniors having trouble selling their homes in this market. What this is doing, McIlwain says, is creating “naturally occurring retirement communities” that will need increasing levels of government-funded services in the years ahead. Because many people prefer to remain in their own homes as long as possible, or may not be able to sell even if they wish to move, suburbs are expected to continue to see substantial growth in their over-65 populations.
For those that do decide to move, many are choosing urban locations—both cities and suburban town centers—where they can be close to their children, friends, work, public transportation and health care.
The Silent Generation, comprised of approximately 28 million Americans ranging from 67 to 82, is shunning traditional suburban senior housing communities in an effort to preserve their retirement funds and independence. As a result, the average age of new residents at these communities has risen to 84.
“This is significantly higher than it used to be and is providing a challenge for this senior housing community,” McIlwain says. “There are still many experiencing unexpected high vacancy rates.”
The Greatest Generation currently consists of about 4.5 million people 85 years of age and older who are living longer than any generation before them.
McIlwain notes that over the next decade, most of this group will experience significant health care needs and require an array of personal services. While many enjoy adequate retirement savings, supportive families, or both, many others have limited financial resources and/or family support.
“Stretched as they are financially, the over-65 population is better off than Generation Y, which faces the worst financial future since the Great Depression, while anticipating the burden of caring for all three of the 65-plus generations,” McIlwain says. “How federal and state funding will be divided among generations in an era of diminished federal resources will be a dominant political and policy struggle of the coming decade and beyond.”
Today, the Silent Generation and the Leading-Edge Boomers are already exploring a variety of differing living situations, such as co-housing, college towns and multigenerational living.
“Some of these formats will survive whereas others may be shorter-lived,” McIlwain says. “Given the large number of people in these two generations, however, each new way of living can present a real and viable market for a developer close enough to consumers to really understand their desires.”
The 2010 census numbers reveal that during the last decade, those over 65 were moving from the cold northeast and older industrial metropolitan areas to warmer climates in the south, west and southwest. Many are choosing to live alone.
“To be attractive to a wider age group, opportunities are there to make homes stylish and green and create them in walkable urban neighborhoods, not just the suburbs, and to make them multigenerational,” McIlwain says. “They also need to be designed for people who are likely to remain actively engaged in the world, with state-of-the-art technology.” This includes everything from adding wireless and broadband functions to more complex medical technology and healthcare applications.
Other trends include creating college towns, which allow seniors to live near children and grandchildren while enjoying on-campus activities; manufactured housing, an affordable option but one which faces the challenge of locating approved sites in established areas; co-housing and group living, a niche that must be multigenerational to maintain mutual support as residents age; and multigenerational living, which is rising at a rate faster than that of overall household growth, but difficult to implement in urban areas dominated by apartment living.
The report recommends a new focus on affinity retirement communities, which bring people together with shared interests ranging from sports to gardening to culture. The number of retirement communities targeting specific university alumni, for example, has doubled over the last 10 years.
According to Robert Sharpe, managing partner of Rancho Sahuarita, Tucson, Ariz., the baby boomer is still a strong buyer in master development communities.
“We just need Gen Y and Gen X to come along and liquidate so they can buy another house,” he says. “There’s a lack of mobility. The good news is that it’s flat.”
Sharpe released his own report based on a questionnaire about the future of residential development that he sent to 70 ULI members who specialize in the subject.
From his findings, he shared that people are still looking for the same things they always have been and even want larger lots with prices going down.
“In terms of urban vs. suburban, we are talking about people wanting an urbanized suburbia,” he says. “They want the amenities, the services and the employment close to home, but they still want the good schools suburbia offers.”
He also sees marketing and communication becoming more social media driven because people don’t have the same budgets they once did.
“Transparency is the biggest thing,” Sharpe says. “People want to know everything about everything. There’s no more hiding, so people are forced to see your community. [That’s why] you want to disclose everything.”
From these two separate reports, ULI Chairman Peter S. Rummell, principal at The Rummell Company in Jacksonville, Fla., isn’t quite sure if there’s any easy answer on how to improve the market with seniors.
“To me, [McIlwain] has proven there is a dramatic interesting market that has vibrancy and a need, while [Sharpe] has proven that the real estate market hasn’t figured out what to do with it,” Rummell says, adding that seniors are looking for some sort of “retail and services meets some version of lifestyle and healthcare meets activities” cluster that hasn’t been invented yet.