Adaptability is one of the cornerstones of human evolution. Evolution is a slow process but adaptability, or the ability to “get by” in the short term, happens quickly and is reactionary. With the economy in a state of disarray during 2010 and 2011, the senior living industry and businesses in other areas were focused on survival. But as time heals wounds, we enter a new chapter that allows the senior housing industry to adapt to the the influence of politics, economics and society. This concept of adaptation provides the foundation for long-term change versus radical change, and 2012’s senior housing trends are about adapting to the current reality and positioning for the fiscal realities and political/policy uncertainty in the future of senior housing.
1. Higher Levels of Acuity – Increased Risks and Costs
Senior living and housing providers are beginning to experience higher levels of acuity (aka sickness) for their prospective residents. This elevates the risk of entrance and subsequently the cost of providing care.
Acuity levels are rising because many seniors have delayed the entry for economic reasons, and they’ve become more accustomed to utilizing family, technology, medicine and community support to remain in their current environment.
Higher acuity levels can lead to a higher cost of care, and providers may need to raise their costs as a result of increased risk, or change their policies all together to avoid the consequences of higher acuity. This may in turn force government benefits programs into playing an even larger role in funding seniors’ care, and it’s also possible seniors may face discrimination for entry into facilities based on their acuity level.
2. Senior Housing Community Evolution – Shift in Brick and Mortar Functions
As the profile of senior housing residents change, so will the definition of types of senior care communities. The shift in resident profiles are giving way to a migration in communities:
• Independent Living Becomes More Like Assisted Living. As more home and community based services initiatives are implemented, seniors living in apartment complexes or 55+ communities will see a greater level of a la carte services offered that will resemble more of an assisted living “feel” at a lower cost delivery as services will be unbundled.
• Current Assisted Living Facilities will function more like Skilled Nursing. Current nursing homes will be handling the “sickest” seniors in the coming years as an alternative to hospital stays. The traditional model of nursing care will migrate to assisted living communities that can have differing levels of care within those communities. As part of this trend, many assisted living communities are finding that the average age of entry for its communities is increasing as people are living with less care longer.
• Dedicated Alzheimer’s care facilities will begin to re-appear in earnest in the next 12-24 months. This trend is similar to a period in the early 2000s when many dedicated memory care communities were established. At the time, there were funding problems and the trend was somewhat ahead of its time given the number of memory care patients. However, a decade later, the supply of ALZ/dementia care communities is low while the demand is steady and increasing, regardless of the funding issues.
3. Aging in Place: Local Community Footprint Expands With Home & Community Based Services
Migratory trends for seniors are decreasing as the economic effects are more devastating than previously imagined, which leads to seniors remaining in their local communities longer. However, the definition of “local community” is changing or better yet expanding. Before the definition of local community used to be defined a 10-15 mile radius, it now encompasses an expanded area of almost 100 miles, based on supply, demand and costs.
This expanded radius is possible as home and community based services and networks are growing, predominantly in major metropolitan markets. Senior living communities and hospitals are partnering more closely to offer a full continuum of care as an extension of their brick and mortar campuses. These marketing efforts are designed to ease seniors into the system of care, starting at home and providing opportunities to expose individuals to the levels of care and communities they’ll be able to choose from when it becomes necessary. The linkages from home health care, clinic, rehab centers to assisted living and skilled nursing facilities will blur more as the power of the network of care becomes greater, and once in the network, individuals may find themselves to be “customers for life.”
4. Creative Senior Living Solutions Gain Traction – Communal Living and Multigenerational Housing
Concepts such as multigenerational housing, the Greenhouse Project, senior villages, co-housing, homes built with in-law apartments and other communal living solutions will continue appearing and evolving as individuals and families learn about the costs of senior housing. The elderly will increasingly move in with their families—or each other— as the economics of co-housing/co-habitation make a compelling case for multigenerational housing. Each of these solutions provides maximum flexibility but as these models become more popular, regulation and funding to further develop these alternatives may stall future growth.
Those living in single-family homes will invest capital in their homes as more parents move in with their adult children. Using home office spaces, basements, attics and other existing solutions will make way for more formal renovations including the “grannie apartment” as either an add-on or standalone. Unlike additions for bathrooms or kitchens, the resale value of “grannie” renovation should be discounted greatly when considering the costs if given any consideration at all. Others may opt for pre-fab cottages or PODs as solutions that can be moved, stored or re-sold when a senior needs to move to a more comprehensive care community.
As the housing market stays stuck in neutral through 2012, money will be invested in making the home more of a multi-generational dwelling out of necessity. Renovation will be a key driver in adaptation for senior housing in both single family homes. The key will be the return on the investment (ROI) but given the uncertainty of the amount of time that an elder may live with their children, it is difficult if not impossible to have a sense of certainity with respect to time. The resale value of these enhancements or modifications will have neglible effect on the value of the home unlike more popular renovations such as kitchens and baths.
5. Politics and the Need for Affordable, Assisted Living
Partisan politics and the election year will do little to advance senior housing policy within the next 12 months. The good news is that the election will bring sobering discussions about the future of health care and senior care. Medicare, Medicaid and other entitlement programs will be at the forefront of the campaign, as the country’s ability to pay its bills, both operating costs and debt service, is called in question. Politicians are realizing that the aging demographics in America are an economic train wreck waiting to happen and are identifying the problem but not discussing any concrete solutions.
The greatest policy challenge yet to be fully addressed is the need for some type of affordable, assisted living for low-income Americans. This includes solutions for simple services to assist with the activities of daily living (ADLs) and memory care. Even considering low-to-moderate income standards, will these ratios and income percentages be realistic (e.g. 60% of median area income)? Congress and state legislatures will need to conceptualize and develop some kind of inter-agency solution that bridges the gap between housing and care.
6. Senior Care Technology – Montoring and PERS Go Mainstream
Senior care technology will begin to become more mainstream both for aging in place and for those in communities. More applications (or “apps”) will be developed for a range of devices including laptops, PCs, tablets and smart phones. Cross-platform applications will be critical as care givers (both professional and familial) will want to carry their own devices and won’t want to carry multiple devices. As end users of technology fall into the younger spectrum, more companies will provide solutions that integrate into the existing technology platforms.
Personal Emergency Response Systems (PERS) will become more prevalent and blend in more with everyday life. Technologies for monitoring will begin to focus on habits and individual behaviors on mundane tasks that don’t require specific interaction with a device. Monitoring pressure in beds, trips to the bathroom, turning on the coffee pot in the morning are examples of simple monitoring techniques that, when monitored for exception processing purposes, provide a means of monitoring without direct user interaction with any device.
For seniors who are less technologically savvy, the television still is the primary electronic device that is connected in their home or their room in the community in which they live. Cable television operators have a strong position to deliver more telecare and monitoring services through their “pipes” and their boxes. Look for set top box manufacturers and cable companies to develop interfaces and applications built in for senior care.
7. Real Estate – Land Rush, Location, Housing Discrimination
Home prices will continue to present challenges for senior housing communities across the US in 2012. As the job market improves slightly during the course of 2012, the housing market will firm up and provide a solid bottom for housing prices in good markets. For markets that have an exorbitant amount of foreclosures, it will still be some time before those markets change. Communities will still have a lag factor as many seniors that may want to move in will still be reluctant to sell their home at current market prices. Once the housing market recovery gains traction, there could be a surge in demand for independent living communities as capital is released after the sale of the home.
Land acquisition and development will become critical in 2012 as competition for prime locations intensifies. The good news is that low financing rates will help make the carry on the new acquisitions more palatable but put pressure on banks to provide construction financing. Locations acquired during the next 12 months will be the new communities starting in late 2013 and 2014. Municipalities will need to address permits and application for new senior housing projects on these parcels as both a means to provide community support and an attempt to increase tax revenues for their communities. The days of NIMBY should start to diminish as residents realize that lack of supply for good senior housing in local communities.
Housing discrimination against seniors will begin to gain national attention during 2012. As seniors are forced to downsize and change their lifestyles, landlords may begin to show delicate signs of age discrimination.
8. Financing For Senior Housing Communities – How Long Can Rates Stay Low?
Rates will stay low for the balance of 2012 thanks to the efforts of the Federal Reserve and the troubles that remain with the European banking system. Senior housing providers will have a window of opportunity to lock in these low rates for the next 12-18 months that gives those who are building or renovating time to get their communities filled up.
Banks will continue to loosen up their underwriting requirements as competition heats up for established owners and operators, and more banks will look at smaller or less-experienced operators in an effort to expand their lending. Banks will become more interested in the details of the underlying operating model for each community financed, looking for functional and financial flexibility to change and adapt with supply and demand in the local marketplace. In 2012, regional banks will have an upper hand with senior housing construction financing with knowledge of local markets and demographic trends and REITs (real estate investment trusts) and large, national banks will provide the long-term financing options. REITs held the upper-hand in the capital markets in 2011 and will most likely remain king of the jungle as long as rates stay low.
As older communities begin to show their functional obsolescence, many senior housing companies will need to examine their current buildings and make decisions about renovating or starting from scratch. The costs for renovation should remain less expensive than new construction if feasible.
9. Personal Finance Challenges & Long-Term Care Insurance
Declines in the net worth of American population presents both short and long term challenges to senior living. If the U.S. enters a new recession or a slow, steady growth trajectory through 2012, it will do little for retirement savings for those who find it necessary to move into senior housing communities. Coupled with a continued challenged residential real estate market, the trend for improved net worth in the 55+ crowd seems unlikely in 2012. As families move in together and more children are caring for their parents, the prospect of financial abuse looms larger and will create some societal challenges where lines are blurred as family members manage finances for their parents.
Long-term care insurance is becoming more prevalent and will continue to grow in senior housing communities during 2012. As younger seniors enter communities with LTC insurance, the increases in the administrative work and burden on supporting handling LTC insurance claims added with any kind of additional support adds to the overhead costs for owners and operators. At some point, these additional costs will be passed along through rate increases in one fashion or another. The good news is that some communities are finding that their newer entrants have a well-balanced retirement plan that includes LTC insurance but the bad news is that those seniors may become “high maintnenance” residents given the complexity of their LTC insurance.
10. More Senior Living Professionals Needed for Growing Industry
No matter how well a community is constructed, the overall basis for a well-run community is the people that make it operate on a day-to-day basis. The senior living industry will see increased demand for qualified professionals that will provide more upward pressure on wages compared to the last two years based upon supply and demand. With funding cut backs anticipated for both Medicare and Medicaid programs, government agencies at both the federal and local level need to provide more training and support funds to cope with the employee development challenges. Compounding the people crisis is the crack down on overtime regulations for home-care providers. While private enterprise is good for competition and keeping rates competitive, the labor costs for senior care are going higher.
Organizations will have to make career development a higher priority to attract and retain talent as part of their overall business plan. This task should not rest solely upon the responsibility of the management of communities but should filter down to its residents as well. Education providers began offering and expanding their senior living courses in 2011 and more will follow suit in 2012 in response to the demand in the state and communities.
Those are just some of the major trends we see in senior housing for 2012. Have comments? Leave us one below or send an email to firstname.lastname@example.org.
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