Americans receiving social security will see their payouts tick up by the highest increment in decades as the senior living industry potentially undertakes another big year for rent growth in 2023.
The Social Security Administration Thursday announced an annual cost of living adjustment of 8.7% in 2023, marking the highest increase in 40 years and a significant step up from the 5.9% adjustment in 2022.
For the 65 million adults who receive social security, the increase will translate to an average monthly social security payment of $1,827, which is an increase of just under $150 per month.
The increase could help ease private-pay residents’ monthly cost burdens as the senior living industry preps for the second consecutive year of large, and in some cases historic, rate increases.
The increase is about 2% to 10% of the average monthly rate for a senior living community, and represents a “positive signal to operators as they set rates for next year,” according to an Oct. 13 investor note from Stifel Analyst Tao Qiu.
“We are optimistic we will see another year of healthy rate growth in 2023,” Qiu wrote.
In addition to a bigger monthly payment, America’s senior population will also get some financial relief by way of lower Medicare Premiums, Qiu noted. According to the Centers for Medicare and Medicaid Services (CMS), the projected average premium for Part C coverage will be 8% lower, at $18; and the average monthly premium for Part D coverage will be 1.8% lower, at $31.50.
Qiu added that operators in 2022 were able to set resident rate increases in the “high single-digit and even low teens” range and that they are also becoming “more sophisticated” in how they bundle rent and care, and justify the value of their communities.
That was evidenced in data shared last month by Chicago-based real estate investment trust Ventas (NYSE:VTR), which reported that average senior living rates increased by about 8% in 2022 among its U.S. operators. Revenue per occupied room (RevPOR) shot up 5%, the highest increase in a decade, management noted.
Despite the increase in revenue, rate increases are necessary simply to keep operating at the status quo as many operators struggle to recover margin lost during the Covid-19 pandemic.
For example, Bend, Oregon-based senior living operator Sunshine Retirement is planning a 2% rate increase across its 42-community portfolio, COO Sadek Nassar told Senior Housing News. He added that Sunshine takes social security increases into account when deciding how much to raise rates. Nassar emphasized that for Sunshine, rate increases this year and last had nothing to do with margin growth.
“This is primarily just to help us cover some of the labor cost that we’re seeing increasing,” he said.
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