In spring of 2019, the National Investment Center for Seniors Housing & Care (NIC) released a research study showing that fewer than half (46 percent) of America’s middle-income seniors will be able to afford the $60,000 average annual costs of seniors housing and out-of-pocket medical expenses in 2029.
The silver lining of the study was that seniors housing developers and operators could opt to build for this underserved market.
About 18 months since the study was released, the dynamic hasn’t changed much, according to Michael Edwin, vice president with consulting and management firm Health Dimensions Group.
“The number of seniors in the middle-income bracket is increasing significantly, not only in the short term but for the next 20 years. The supply of affordable product for this middle market is short in many markets.”
Edwin’s remarks came during a Seniors Housing Business webinar titled “Seniors Housing Middle Market Conundrum – Development Challenges in Today’s Environment.” Edwin was joined by Craig Abbott, an executive vice president with the same company.
One of the big draw-backs of serving middle-income seniors is that they’re more likely to delay the decision to move in, meaning they require more services, said Edwin.
“Seniors with lesser means will come in sicker, later and older than folks with wealth.”
However, home values have remained high despite the COVID-19 pandemic, meaning that home-owning seniors have some equity available. According to home-buying site Redfin, nationwide median home sale prices actually increased 4.7 percent in April.
Developers may also be surprised how many wealthy seniors still consider moving into communities targeting middle-market seniors, added Edwin.
“Many seniors with means will be knocking on your door. They want to compare to higher-cost options. These folks may be more cost conscious, looking for value over thrills.”
Abbott shared his “vision board” for what developers should consider when looking at a middle-market seniors housing opportunity. The list includes demographics, price point needed to hit goals, changes needed to existing products, construction timeline and whether a financial partner will be able to underwrite the proposal.
Perhaps most importantly, added Abbott, is that middle-market developers should plan to be in it for the long haul
“We typically don’t see these being the quick hits, where you’re in for four years and flip it. It requires a bit longer duration to be into a product like this from the investment side of the equation.”
For those willing to tackle the unique challenges of the sub-sector, though, strong opportunities will continue to arise.
“The opportunity to develop and expand into this untapped, underserved market will continue for many years,” said Edwin. “The demand for the middle market exceeds supply today.”
To view the full webinar, click here.
— Jeff Shaw