Too rich for affordable seniors housing, too poor for market-rate seniors housing—the predicament is widespread, but the senior housing options for these older adults are not.
The middle income seniors housing market includes older adults with an annual income between about $25,000 or $30,000 and $50,000, Plante Moran Living Forward Principal Dana Wollschlager explained Wednesday during a Senior Housing News webinar. These older adults have too high an income to qualify for the low-income housing tax credit program, for instance, but too low an income to afford most private-pay seniors housing.
The seniors housing industry has done a mediocre job of meeting the needs of extremely low income seniors, Wollschlager said. But to better serve middle-income seniors, she explained, there’s a variety of things that should take place, including making improvements to reimbursement structures, policy changes, improving government communication between agencies, improving the regulatory environment and reevaluating building code requirements.
No matter how you dice it, though, the need for middle-income seniors housing is real and pressing.
More than a quarter—29%—of U.S. adults over than 85 years of age have an annual income between $25,000 and $50,000, Wollschlager said. On top of that, she explained, the average median retirement savings among Americans ages 62-69 in 2015 was just $105,000—and the gap between top earners and the rest of the population is expected to increase significantly over the next 40 years.
“Folks never anticipated [senior care] would cost this much,” Wollschlager said.
All things considered, there are proven ways to finance and design middle-income senior housing communities to be profitable and worthwhile to own and operate.
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Designing for the middle-income senior
Independent living residents spend as much as 70% of their time in their apartments, according to the “Healthy Aging Begins at Home” report from the Bipartisan Policy Center.
Accordingly, the senior living unit is where the majority of a middle-income community’s design-related expenses should be spent, Rick Banas, the vice president of development and positioning at Gardant Management Solutions, said during the webinar. Based in Bradley, Illinois, Gardant has more than 15 years of experience in developing, managing and consulting for independent living, assisted living and memory care communities.
When designing for the middle-income senior population, you have to look at their “needs” versus their “wants,” and then decide which “wants” they can actually afford, Banas explained.
For instance, the furniture in the community shouldn’t be the highest quality, but it should still be nice, Banas said.
“It should be a nice quality, but not so upscale that they don’t want to sit on the furniture,” he explained.
The ideal middle-income seniors housing community should have between 80 and 100 assisted living units, and around 20 memory care apartments, Banas said. And operators should go in with the expectation that these units will fill up quickly.
“Anything below 98% occupancy is unacceptable,” Banas said.
Additionally, the community should have flex spaces, which can be used for a variety of purposes, Banas explained.
There are several ways to secure financing for a middle-income seniors housing community, including conventional financing methods, Fannie Mae loans, HUD loans, tax credits and bonds, Banas explained. Once the community is up and running, it does not have to keep charging residents for services beyond their rents, Banas said.
“We believe in a Southwest model,” he said, noting that Gardant doesn’t believe in a lot of add-on charges.
“We don’t have baggage fees or change-of-flight fees,” he said.
Written by Mary Kate Nelson