Predicting the adequacy of future senior housing inventory is tough, and depends in part on assumptions about the age at which people move in, according to a new blog post from the National Investment Center for Seniors Housing & Care (NIC).
The blog post compares the estimated 45,000 units of new supply delivered across the U.S. in the past year against the growth of two different age cohorts: adults 80 years of age or older, and adults 83 years of age or older.
By 2025, the U.S. Census Bureau estimates there will be 10.2 million people who are 83 years old or older. With a penetration rate of about 10%, the senior housing industry will need to add roughly 164,000 additional senior housing units by 2025 to meet demand by that time.
However, if the current national run-rate of 45,000 units per month continues, the U.S. would reach that total in 3.7 years and potentially leave the industry with excess inventory if the rate of new openings continues apace through 2025, according to NIC.
To take another view, the U.S. Census Bureau estimates that there will be 15.6 million people age 80 or older by 2025. With a similar penetration rate of about 10%, the senior housing industry will need to add 316,000 additional units of supply to meet demand by that time.
At an assumed run-rate of 45,000 units added per year, the senior housing industry would fall short of demand by roughly one year’s worth of inventory growth, NIC explained.
“An estimate of demand using the 80-plus cohort suggests that today’s supply run-rate will leave us short of inventory by 2025 … while the 83-plus cohort analysis suggests excess inventory by 2025,” wrote Beth Burnham Mace, NIC’s chief economist, in the blog post. “The answer is probably somewhere in the middle of these two results and points out how sensitive the analysis is to the age-cohort assumption used.”
One way the industry could help insulate itself from further occupancy loss would be to slow the rate of new supply, especially in markets plagued by overbuilding, Burnham Mace noted. Another would be to bolster demand for senior living by growing the occupied penetration rate, possibly by attracting younger residents.
Written by Tim Regan