NIC Study: Large Number of Middle-Market Seniors Poses Massive Challenge, Opportunity

by Jeff Shaw

ANNAPOLIS, Md. — Middle-income seniors — those with too much money for government assistance, but not enough to afford luxury rents — may be the single biggest growth opportunity for the seniors housing industry over the coming years, according to research by the National Investment Center for Seniors Housing & Care (NIC).

The Annapolis-based nonprofit organization is a data and analytics firm serving the seniors housing industry. The research project was conducted in partnership with NORC at the University of Chicago, a non-partisan research institution that seeks to guide programmatic, business and policy decisions with data.

The findings were presented on a webinar hosted by Seniors Housing Business on Tuesday, July 16. Approximately 1,200 industry professionals attended the webinar.

“Part of our purpose for doing this study was to shine a light, to call attention to this huge societal need and challenge that also provides a tremendous market opportunity,” said Bob Kramer, NIC’s founder and now a strategic advisor to the organization. “Middle-income seniors are the forgotten group because they don’t have advocacy behind them, but are not wealthy enough to attract the interest of developers and investors.”

These types of seniors include retired teachers, firefighters, government workers and nurses, noted Beth Mace, NIC’s chief economist. The cohort is expected to nearly double from 8 million seniors today to 14 million seniors in 2029, she added.

And 2029 is just the front of the demographic wave of seniors coming our way. The first baby boomer will turn 83 in 2029, and the average age of a resident in seniors housing is 84 according to the American Seniors Housing Association.

“The investment opportunity is large and it’s growing,” said Mace. “We have a very long run of very big growth in that cohort.”

The Numbers Game

The research report estimated average combined out-of-pocket costs of medical care and private-pay seniors housing to be $60,000 a year, but only 46 percent of seniors (6.6 million people) will be able to afford that. That group grows by 2.3 million people if costs are reduced to $50,000 a year.

“We have to consider ways we can lower the cost of seniors housing to include a much larger cohort of seniors,” noted Mace.

Kramer added that the numbers were intentionally conservative, and NIC provided an interactive tool for its members to change their own assumptions on the results and see how it affects the numbers.

Joining the webinar were two seniors housing operators that specifically target the middle-income market — Charlie Trefzger, CEO of Affinity Living Group, and Jon Fletcher, vice president of Presbyterian Homes & Services.

Trefzger said that service can’t be sacrificed, but in order to keep seniors housing affordable to middle-income seniors, operators must find every efficiency possible. He noted that his communities often pull a financial statement every day because “that’s the attentiveness required to serve this particular market.”

“We’ve very focused on the cost of staffing. We’re very focused on key vendor relationships and economies of scale,” said Trefzger. “This doesn’t mean that we’re skimping on quality or limiting our staffing. It means that we’re laser focused on these expenses and ensuring we understand what we’re doing at all times.”

Trefzger also strongly encouraged operators to better understand Medicaid as a funding source, and to help residents find financing that they may not realize is available to them such as VA benefits.

“It’s time to do the right thing and step up and help,” he said.

Fletcher’s company also uses a variety of ideas to keep costs low and quality high. Ownership keeps properties for the long-term, meaning adequate profit can still be made at a lower margin. Units have modest finishes, but are slightly larger to “feel more like home.” Communities are all in close proximity to gain market share and purchasing power, and to maintain staffing efficiency.

By building affordable communities that seniors want to live in, Fletcher said that the company is able to make up for some revenue loss with consistently high occupancy.

“There is no single, silver bullet to solve this,” said Fletcher. “It’s really a combination of strategies.”

— Jeff Shaw

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