From the effects of the delta variant to a worsening labor crisis, the senior living industry faces myriad challenges — but there are also powerful tailwinds that are propelling a pandemic recovery and should lead to a bright future for the sector.
The recent experience of Bild & Company Founder and President Traci Bild illustrates several of these helpful trends.
Earlier this year, Bild moved her mother to a life plan community in Florida. The decision was precipitated by a series of hospitalizations during the Covid-19, but solidified by rising home values that allowed Bild and her husband to sell the condominium in which her mother lived, for double their purchase price.
This covered the entrance fee for the life plan community, and Bild had equity remaining from the sale. She could have waited a few months more to see if home values would increase further, but the value proposition of moving her mother into a community now outweighed the potential increase in the condominium’s near-term future value.
“The value of the move, in comparison to the value of me earning $3,000 to $5,000 by waiting another six to eight months [to sell] was not even close,” she said.
The U.S. is in the midst of a bull housing market, with home values well above established norms. The pandemic also is compelling baby boomers to reconsider how much longer they want to work, and some are deciding to retire early. The pace of boomers exiting the workforce voluntarily increased from February 2020 to September 2020.
These factors are contributing to improvements in senior living occupancy rates, despite ongoing pressures from the pandemic. A new report on Covid-19 recovery and technology from Senior Housing News and MatrixCare revealed that 60% of respondents reported occupancy gains, although rates have not returned to pre-pandemic levels.
Looking further to the future, boomers will also place enormous strains on the health care system in the coming years, as health care spending is expected to reach $6 trillion by 2027.
There is the possibility of boomers relying on home care services to age in place at home longer, putting off a move to senior housing until absolutely necessary. But the need to control health care spending could also create powerful upside for senior living providers that are positioned for managed care.
A bull housing market
Housing sales pricing has exploded during the pandemic, driven by a combination of limited supply, rising costs to build new homes, and buyers seeking opportunities in suburban markets.
The national median price for active U.S. housing listings in August 2021 was $380,000. That represented an 8.6% increase over the previous year and a 19.6% improvement from the same period in 2019, according to data from the National Association of REALTORS.
The national inventory of active listings decreased nearly 26% over the past 12 months, and the number of listings is almost 53% lower than in August 2019. Homes that are on the market are selling at a brisk pace. The average home spent 39 days on the market in August of this year, compared to 56 days a year prior and the 63-day average from 2017 to 2019.
The pace of home value appreciation is well above historic norms, Beth Mace, chief economist for the National Investment Center for Seniors Housing & Care (NIC), told SHN. Data from the Federal Housing Finance Agency (FHFA) revealed that housing values rose 18.8% from June 2020 to June 2021, and 89% of homes listed sold within 30 days.
For perspective, house price growth in a balanced market usually ranges between 5% to 6%.
“It surely is a seller’s market,” she said.
As Bild’s experience illustrates, the market is facilitating moves into senior living. However, the situation is complicated. A contributing factor to the limited supply is that baby boomers are preferring to age in place, rather than sell their homes and either move in with an adult child or entertain a move to senior housing, according to the New York Times’ analysis of Federal Reserve data.
Local sales teams with Juniper Communities are noting the bull market is a launch point for some people to downsize, but not everyone is moving to senior housing, Founder and CEO Lynne Katzmann told SHN.
Some sellers are downsizing to multifamily apartments because they do not need the footprints of a single-family home now that they are empty nesters. Katzmann believes that the experiences of downsizing to an apartment will make it easier to sell Juniper to future residents, when it is time to transition to senior housing.
And when that time arrives, the company’s corporate and local sales teams will be ready.
“We’ve learned during the pandemic that occupancy at our buildings is very much a sales process, and that people need to be skilled in sales, particularly when you have large occupancy gains to be made,” she said.
Bild & Company Director of Client Strategy and Operations Jocelyn Schrader agrees that today’s downsizing trend could help drive senior living occupancy in the coming years.
“Convincing someone to leave a single-family home to an apartment is a leap. Moving from a single-family home to a townhome, and now an apartment, is an easier sale,” Schrader said.
Right now, providers are hoping to leverage the market to their advantage, she told SHN. Her clients are forging new or strengthening existing relationships with realtors or real estate brokerages in their markets, through networking events geared toward educating real estate professionals about the benefits of senior housing for older adults, or through referral programs.
Some of Bild & Company’s clients are directly reaching out to prospects via postcards, inquiring if they are considering senior housing as an alternative, and how selling their homes can fund a move.
The Arbor Company’s local sales and marketing teams are also doing outreach to real estate agents and brokerages in their markets, educating them on the benefits of senior housing for any older adults looking to take advantage of the hot housing market, Vice President of Communications Chris Harper told SHN. Atlanta-based Arbor operates a portfolio of 45 communities in 11 states east of the Mississippi.
“The hope would be that realtors refer their clients to us during their sales process. They can have senior housing as another tool in their arsenal,” he said.
Arbor also hosts a “Senior Living Live” webinar series through which the company educates prospects and new move-ins on how to downsize their belongings in preparation for a move. One resident has taken that a step further, and visits other communities around the Atlanta area to host live presentations.
“His major pitch is, ‘Your kids don’t want your stuff,’” Harper said.
More boomers retiring
The economic pressures brought about by Covid-19 are leading more baby boomers to exit the workforce.
Nearly 28.6 million boomers retired from the U.S. workforce in the third quarter of 2020, according to a November 2020 analysis of monthly labor statistics by Pew Research Center. That is 3.2 million more boomers than during the same period in 2019.
The pandemic has provided the oldest boomers time to reassess their finances and other factors, and many have decided to retire early rather than remain in the workforce for a few more years, the Los Angeles Times reported.
Quality of life is a determining factor in the uptick of boomers exiting the workforce. Some are finding their nest eggs can be extended without needing to pay for job-related expenses such as transportation and lunches. Others simply found being at home to be fulfilling, and even more are choosing to exit the workforce due to medical issues, or family and personal reasons.
Some proportion of these early retirees may be considering low-acuity senior living communities, particularly as an antidote to the isolation they have experienced during the pandemic.
Juniper’s Katzmann indicates that new prospects are looking exactly for engagement and socialization.
“What we’re hearing from people is they’re looking at us because they want to be assured that they can be with other people on a regular basis. They’re looking at the community for its activities, for its multiple food options, and they’re looking for community. They’re looking not to be isolated,” she said.
Not all boomers are retiring voluntarily, however. Pew’s analysis notes that boomers with only a high school diploma are exiting the workforce at a higher rate than their college-educated peers. The number of Hispanic boomers retiring increased four percentage points from February 2020 to September 2020. Asian Americans retired at a rate 3 percentage points higher during the same period.
This corresponds with job losses within the hospitality and leisure industries, which employ a large number of workers of Hispanic or Asian descent, Pew Research Center Senior Researcher Richard Fry told SHN.
Fry indicated the patterns continued in the first quarter of 2021.
Providers should be aware of these trends, which could translate into demand for more affordable senior living options, and perhaps communities that are welcoming to particular people of particular cultural backgrounds.
Priya Living Founder and CEO Arun Paul described this opportunity during a recent SHN+ Talks appearance, pointing out the phenomenon known as “the browning of the graying of America.” Priya is seeking to serve diverse resident populations at attainable price points.
Rising health care costs
Baby boomers are healthier overall, compared to previous generations. But the generation will place enormous strains on the country’s health care system in the coming years.
Health care spending in the U.S. is expected to reach $6 trillion by 2027, according to a 2018 report from the Office of the Actuary at the Center for Medicare and Medicaid Services (CMS). That will account for 19% of the country’s gross gross domestic product (GDP), and 47% of the spending will come from federal, state and local government funding.
Katzmann believes Juniper Communities is prepared for this future with its integrated care platform, Connect4Life, which has been licensed by AllyAlign Health as an integrated care framework for providers that are considering entering the Medicare Advantage space.
Since launching the Connect4Life initiative, Juniper’s residents are hospitalized less often than comparably frail seniors in the general Medicare population. Through the platform, communities and ancillary health care partners are able to use electronic health care databases to work together to achieve better health outcomes and reduce health care billings.
“What Connect4Life has done is provide convenience and coordination, not only to the resident, but to their adult child,” Katzmann said.
Connect4Life will tie in with Perennial Consortium, the operator-owned Medicare Advantage (MA) network in which Juniper is an owner, along with other providers including Ohio Living, Christian Living Communities and managed services partner and risk management company AllyAlignHealth. Other providers and insurers are also making moves to tie Medicare Advantage plans to coordinated care models for senior living residents.
To be successful in the coming years, senior living providers likely will have to find a way to play in the managed care space or otherwise innovate to meet a dynamic market. But it’s also true that providers across the board should be buoyed by the sheer increase in older adults. The long-anticipated wave of baby boomer demand will be intensified by the relatively smaller size of the subsequent generation.
The caregiver support ratio — the ratio of adult children in the 45-64 age demographic serving as primary caregivers to their parents — will worsen in the coming years, because boomers had fewer children. The ratio will decrease from 7:1 in 2015 to 3:1 by 2026, NIC’s Mace told SHN.
“For aging Americans, it would be a support to senior housing or other congregate settings,” she said.