Senior Housing Affordability Crisis Looms

A new report by the National Investment Center for Seniors Housing & Care finds that 54 percent of middle-income elderly won't be able to pay for assisted living and out-of-pocket medical costs by 2029.
NIC analysis of data from the Health and Retirement Study. Figure courtesy of NIC

The number of middle-income seniors in the U.S. will surge over the next decade, and many of them will need the level of care that only a senior housing community can provide. But there’s a snag: Most of the 14.4 million people in this cohort won’t be able to afford it.

A new report by the National Investment Center for Seniors Housing & Care (NIC) finds that in 2029, 54 percent of middle-income seniors will have annual financial resources of $60,000 or less—falling short of the projected annual price tag of $62,000 for assisted living and out-of-pocket medical costs.

This amounts to 7.8 million people who won’t be able to check into a private-pay senior community, even if they draw from their housing equity in addition to their income. If we consider income and annuitized assets alone, a staggering 11.6 million middle-income seniors—81 percent of the total cohort—are out of luck if they need to pay for a professionally managed home. 

Strapped for cash

The new analysis uses data from the Health and Retirement Study, a national longitudinal survey of people aged 50 and older, to offer fresh insights on an often-overlooked demographic group: seniors who aren’t poor enough to qualify for Medicaid long-term care, but aren’t rich enough to easily access the abundance of high-end senior housing options on the market.

NIC analysis of data from the Health and Retirement Study. Figure courtesy of NIC

NIC projects that the number of middle-income seniors aged 75 and over will nearly double from 7.9 million in 2014 to 14.4 million in 2029. Most of this burgeoning cohort of seniors will have some mobility limitations, and one in five will be classified as “high needs”—with multiple chronic conditions and at least one “activity of daily living” limitation.

Moreover, NIC’s 10-year model ends before the large wave of seniors turns 85, when health problems tend to accelerate. The number of seniors needing additional care is therefore likely to increase sharply after 2029.

Challenge and opportunity

It’s not all bad news. Even as the middle-income cohort grows, the shift in the income distribution will also reduce the number of low-income seniors and increase the number of well-off retirees over the next decade. The higher-income cohort will have the financial means to choose their options for housing and care, a boon to developers and operators of senior homes.

The growing size and proportion of the middle-income segment also creates opportunity for the industry.

“The group of middle market seniors will lead to additional demand for seniors housing, but likely at a different price point and with different amenities and service offerings,” noted NIC’s Chief Economist Beth Burnham Mace, to Multi-Housing News.

“There are a number of operators/properties today that address this cohort and often the units may be a smaller size and the common shared areas may be enhanced. For this cohort as well as the more traditional cohort, the opportunity for socialization and access to wellness programs and nutritional food choices is important,” Mace added.

Around 2 million older adults are currently living in senior housing across the country, split roughly evenly between independent living and assisted living facilities.