Are There Any Untapped Senior Housing Opportunities?

A looming elderly population boom combined with a pre-existing apartment supply and demand imbalance may further propel the senior housing market’s already sizeable returns, according to a February 2026 white paper by Clarion Partners.

Average gains across the sector have already outperformed the average returns of the combined multifamily, hospitality, industrial, office and retail markets over a 20-year period. The sector’s most recent pain point, the COVID pandemic, stands out as the sole period when the senior housing market’s performance softened.

This may serve as an opportunity, since past negative performance and financing pressure for newly completed projects with leasing difficulties may be leveraged as an attractive market entry point. Similarly, financing opportunities could arise as owners seek direct or mezzanine debt to remediate such distressed properties.

Several entities have already made waves within the market, including Dwight Capital, which acquired Midland States Bank’s $500 million senior housing HUD mortgage servicing rights portfolio, and Sonida Senior Living, which agreed to pay $1.8 billion for CNL Healthcare Properties’ portfolio of 153 assets.

Senior housing supply continues posing challenges

Development activity, however, remained muted as construction starts stalled due to capital constraints. Just 10,100 units were added to the national pipeline in 2025, down 18 percent year-over-year and 66 percent compared to their 2021 peak.

The average occupancy across senior housing clocked in at 89.4 percent in December, up 200 basis points year-over-year and 11 percent since its lowest point in 2021. Since then, quarterly net absorption has averaged more than double the sector’s long-term historical average.

On the demand side, the population of seniors aged 80 and above is expected to double by 2040. What’s more, the elderly are wealthier and live longer than past generations. In 2022, the median net worth of the 75 and above bracket doubled the inflation-adjusted figure registered in 1989. In 2019, life expectancy was nearly one and a half years higher than in 2005.

The level of construction needed to maintain future market equilibrium, meaning an occupancy above 90 percent, would require a rate of supply growth that has never been recorded in the entire sector’s history. This creates a window of opportunity for development as the massive construction deficit to cover mounting demand equates to $275 billion by 2030.

Some sector risks to account for

Despite solid senior housing fundamentals and abundant opportunities, the sector is not without its risks. For instance, the same technological advancements that allow for longer life spans may also delay senior housing adoption as aging residents remain in their homes for longer. This may lead to shorter length-of-stays and a more dependent tenant base, requiring higher-intensity care and greater staffing levels.

Even in a scenario where delayed adoption does not occur, the cost and availability of labor may still pose significant challenges. While down from pandemic-era levels, labor costs are still making up 60 percent of operating expenses, and wages are likely to remain elevated given the healthcare worker shortage. However, these expenses may be passed on to tenants, given the historical correlation between labor cost and rent growth.

Lastly, an economic downturn may affect senior household net worth, which could in turn impact their ability to become tenants, leading to lower occupancies and a decline in asset valuations.