Where looming demographics and a lack of adequate supply are widening the rift between high-end and affordable senior housing, some providers have found solid ground in the middle-price point development market.
Providers who have begun to target the middle-income bracket have already seen rewards in the form of lower development costs and the anticipated demand from a population that doesn’t have a lofty nest egg on which to retire.
“There is a bigger opportunity in the senior living industry and a need for a middle-price point product,” says James Gray, president and founder of Bridgewood Property Group.
Bridgewood has two distinct project pipelines to serve residents of different means. While the, the Houston, Texas-based developer’s projects have historically skewed more toward the luxury side, the company has branched out in recent years to address the housing needs of a less affluent clientele.
Three years ago, the company purchased a portfolio of properties comprising 1,000 units to serve the market for middle-income seniors. Now, Bridgewood is taking that program and expanding it to different markets based on the success of its initial endeavors.
The middle-price point properties are smaller in scope compared to Bridgewood’s high-end developments. Whereas a high-end price product will cost almost $200,000 per unit to build, the company’s middle-price point product costs about $100,000 per unit, Gray says.
Location also makes a difference when it comes to spending less on development costs, such as building in a more suburban area where land prices cost less than they might in a urban metro, says Gray.
“Land cost is key,” he says. “A one-story structure is usually less expensive to build. If you can find a place where the cost of entitlements are lower, that impacts the bottom line.”
While developing a middle-price product might entail scaling down on quantity, that doesn’t necessarily mean skimping on the quality side.
For example, in the community’s dining service program a high-end Bridgewood property might have four to five entree choices, whereas the middle-price product might have two to three options.
“Still, the food quality is high,” Gray assures.
Bridgewood’s properties are predominantly in Texas, with the exception of some located throughout the Midwest and Southeast.
The unit mix of the company’s middle-price point developments is comprised of 80% independent living and 20% assisted living. Additionally, each building contains roughly four wings of independent living and one wing designated for assisted living.
“Construction-wise, square-footage might be down 15% than our high-end properties, but they’re still comfortable,” Gray says.
Since state funded affordable housing programs are susceptible to budget cuts, finding quality housing stands to be a critical concern for middle-income seniors and baby boomers who don’t qualify for federally subsidized housing options.
Nearly two-thirds of seniors (64%) believe it will be challenging to find quality housing that meets their physical needs as they age, according to a report from Hart Research Associates published in June. Additionally, surveyors noted 61% of adults age 65 and over stressed that a major challenge lies in finding housing that is affordable.
As states experience funding cuts to programs that fund affordable senior housing developments, therein lies the opportunity for providers to develop communities that fill the void between state mandated “affordable” and high-end housing.
Some developers are even helping to fill that gap by providing market rate developments located within close proximity to more affordable housing options.
Presbyterian Senior Living (PSL) recently celebrated the opening of Heritage Run, its newest market-rate building in Baltimore, Maryland.
Located within a master-planned development that was formerly the grounds of Baltimore’s old Memorial Stadium, Heritage Run at Stadium Place is a 36-unit independent living rental community that adheres to PSL’s objective of offering housing and services to seniors across a wide economic spectrum, says CEO Stephen Proctor.
The seventh building on the site, which includes four high-rise buildings with capacity for more than 350 low- and moderate-income residents along with a green house nursing center and YMCA facility, Heritage Run compliments the other developments on campus by providing the only rental complex on site.
Though there is no waiting list for Heritage Run, demand has been driving the building’s occupancy to about 50% full already, and that’s moving at a pretty good clip, says Proctor.
While Heritage Place might not be as expensive as some of PSL’s entry-fee continuing care retirement communities, the pricing is still scaled slightly higher than the middle income population. On average, units for Heritage Run will cost about $1,000 to $2,000 a month per resident.
“It’s affordable in the classic sense of being good value for the services and housing residents receive, but not affordable from the standpoint in the description of a lower income project,” Proctor says.
Heritage Run residents age 62 and older have the option to choose from five different floor plans, featuring one- and two-bedroom layouts. Within each apartment is a washer, dryer, various household appliances, trash removal and in-unit emergency call system.
On-site amenities include a fitness center, community room, private meeting room, catering kitchen, as well as access to a variety of community activities and events.
While reluctant to make a blanket statement on whether a shortage of federally subsidized affordable housing presents any significant opportunity to develop properties that target more middle-income consumers, Proctor says they are two different markets and providers should study both to see what the relative demand is for each.
“Our strategy over the last few years has been to be able to have independent living for seniors that covers the entire economic waterfront, from those with very little to those who are well-endowed financially,” says Proctor.
Written by Jason Oliva