What to Expect for Senior Housing in 2024
In the first installment of our outlook series, senior housing experts discuss trends and challenges for the year to come.
Senior housing occupancy rates have been constantly improving over the past nine quarters, supported by strong demand and fairly limited supply. Tight financing conditions continue to influence senior housing inventory growth and new construction, according to the latest data from the National Investment Center for Seniors Housing & Care. As of the third quarter of 2023, year-over-year inventory growth was only 1.3 percent, near its smallest year-over-year increase since 2012, the same source shows.
Slow inventory growth, coupled with economic uncertainty, an aging population and growing income inequality, is keeping demand for affordable senior housing options particularly high. And savvy real estate players are not sitting on the sidelines, despite the currently tough economic conditions. Federal, state and local governments have started taking action to help preserve existing inventory and build new senior housing.
“Many new incentives are being provided to developers on a local level, encouraging new/repurposed construction to serve the needs of low-income seniors,” Standard Communities Co-Founder & Principal Scott Alter told Multi-Housing News. “Mixed-income communities, public-private partnerships and building tax incentives have recently helped to increase affordable senior housing developments,” he added.
However, these efforts are barely keeping up with the growing number of low-income older adults. More than 15 million older adults age 65-plus are economically insecure, according to the National Council on Aging.
“They live at or below 200 percent of the federal poverty level—which is $27,180 per year for a single person in 2022,” Alter noted.
While the need for affordable housing is a national issue, some areas are considered to be epicenters. Los Angeles, for example, is renowned for its housing crisis, and seniors are among the most affected demographic. Multiple neighborhoods are seeing an influx of investment and new luxury development, which is only adding to the affordability crunch. However, some real estate players are still finding ways to cater to low-income seniors by partnering with public entities.
“Public-private partnerships are crucial to addressing the need for more affordable senior housing,” Alter said.
Recently, Standard Communities, in collaboration with Pacific Southwest Development Corp., acquired six fully affordable properties in Los Angeles County, five of which are senior housing. The two partners intend to preserve the Section 8 affordability at the properties, under new HUD Housing Assistance Payments contracts.
“By working with the local, state and federal housing agencies, we were able to extend and preserve the affordability of all six communities for the next 20 years at no cost to the residents,” said Alter.
Going forward, the population of those over 80 years old is expected to grow to nearly 24 million by 2025, doubling from 2016, according to U.S. Census Bureau estimations quoted by Alter.
“Inventory will likely continue to expand due to the high demand, although at a slower pace in the near future due to various factors like the economy, inflation and rising interest rates,” he anticipates.
Considering all these challenges, some innovative solutions are necessary to address the growing demand for senior housing facilities, and Alter expects to see an increased emphasis on collaboration between federal, state and local governments, nonprofit organizations and the private sector in order to bring more senior housing options across the country.
What are the challenges of senior living in 2024?
In the past three years, materials pricing and labor costs have increased overall construction costs for senior housing projects. More recently, prices have stabilized to a certain extent, even though they’ve remained high compared to previous years, McShane Construction Regional Vice President David Rintz, told MHN.
Some developers have found it more efficient to construct midrise projects as opposed to more expensive garden patio type developments, according to Woda Cooper Cos. Vice President of Development Tammy Stansbury.
And this trend might continue in 2024 considering that in addition to high construction costs, insurance and utility costs have also been skyrocketing in recent years, according to The BLVD Group Managing Principal Robert Budman.
“This increase in costs, combined with lower workforce availability and staffing challenges, has had a large impact on the bottom line,” Budman told MHN.
Next year, however, the more prevalent barrier in senior housing will be the availability of financing and equity for building new projects, Rintz believes. “We see this as the biggest challenge right now.”
On a more optimistic note, Budman expects monetary tightening to ease in 2024, which would help developers access funds at lower costs. He also anticipates absorption and occupancy levels to continue to increase in the upcoming year.
Senior housing trends in 2024
Technology and wellness will play key roles in 2024. The use of telehealth technology, combined with the adoption of smart sensors, wearable health devices and updated emergency care notification devices, have the potential to help seniors reduce doctor visits, Budman noted. Stansbury also expects more affordable housing developers to partner with organizations that aim to provide health services on-site in order to reduce the number of individuals who are admitted to nursing homes for minor medical needs.
And as resident health continues to be a top priority, spas and outdoor wellness areas will be important features for seniors who want to have active lifestyles.
“Rethinking the way residents engage with community areas to promote mobility and engagement all contribute to wellness and quality of life,” Budman added.
In Kentucky, for example, the state housing agency, Kentucky Housing Corp., works to ensure that senior-only developments meet the needs of future residents by adding design features that go beyond minimum standards—such as energy-efficient elements; kitchen and vanity cabinets with lever-shaped handles or U-shaped pulls on all drawers and cabinet doors; hallway light fixtures with an output of at least 2700 lumens to ensure good visibility; a lobby or community area to support connections with age-friendly seating, central common areas that can be used for resident activities and wellness, as well as kitchen and bath cabinets that can be transformed for handicapped accessibility, enumerated Stansbury.
Another trend Rintz has noticed is developers focusing on future proofing their senior housing communities by including shell space for future elements that would allow them to transition from active living to assisted living as their resident base ages. In theory, this is a good idea, but in reality, there’s a lot of wasted space that could be put to better use.
“Moving forward, developers are focused on creating spaces that meet the needs of today’s residents and want to maximize amenity space that will provide an enriched living experience for seniors,” Rintz concluded.