Though the stars appear to be aligning for long-term success in the senior housing industry, near-term headwinds continue to present challenges in employee hiring and retention.
“The combination of a strong economy and consumer confidence and a pretty good stock market and home prices that have appreciated—those are all theoretically factors that we think should support demand for seniors housing,” Beth Burnham Mace, chief economist at the National Investment Center for Seniors Housing & Care (NIC), said at the NIC Spring Investment Forum in Dallas.
Median home prices across the U.S. have reached a new high at $253,000, Mace said, citing data from the National Association of Realtors. In fact, today’s housing prices are 13% higher than they were at their last peak, which occurred back in 2007.
Because many seniors sell their homes to fund their moves into senior living communities, for providers, the more money a prospective resident can make by selling his or her home, the better.
At the same time, it appears that senior housing pricing has also reached a relative high point.
“$180,000 per unit—this looks like peak pricing for senior housing,” Mace said.
Still, the national unemployment rate—4.1%—is low, which is creating a bit of an issue for senior housing providers looking to hire and retain frontline workers.
“It’s a really, really tight labor market,” Mace explained. In this environment, workers may feel more confident leaving their jobs to pursue other opportunities—which means senior living providers may need to be extra diligent when it comes to their retention efforts.
“It’s difficult to hire labor, and it’s difficult to retain labor because people are quitting,” Mace said.
Plus, in the future, unemployment could fall even more.
“My opinion is that [the unemployment rate is] going to continue to go lower,” Mace said. “Maybe not back to 2.6%, but definitely to continue to go lower.”
All the while, assisted living wage growth is currently exceeding rent growth—a situation that could hamper providers’ ability to grow profits.
“That’s going to put a lot of pressure on operators who are trying to grow their NOI,” Mace said.
Specifically, assisted living wages are rising above 5.5% at a year-over-year pace, compared to a 2.6% year-over-year pace across all sectors. Generally, labor costs account for about 60% of the operating costs for senior housing providers.
Written by Mary Kate Nelson