Key Takeaways. This blog examines the impact COVID-19 deaths through late-April 2021 have had on near-term supply needs for seniors housing. We conclude there are 41,000 fewer units needed at the national level in the near-term than what may have been projected prior to the COVID-19 pandemic. For perspective, 41,000 units is larger than the entire seniors housing inventory in the Philadelphia metropolitan market.
Background. In 2019, NIC published a whitepaper titled, Looking into the Future: How Much Seniors Housing Will Be Needed?. The paper provided supply projections out to the year 2040 for seniors housing at the national level. The paper considered differing scenarios of penetration rates as well as age cohorts (i.e., 75-plus, 80-plus, 85-plus). Based on the 85-plus cohort and the 30% penetration scenario, it concluded that 1,657,868 units of seniors housing would be needed in 2021.
This blog provides an update to these projections using data from the U.S. Census along with provisional death counts to COVID-19 for seniors 85+ from the CDC and National Center for Health Statistics (NCHS).
Findings. The CDC reports weekly updates of provisional COVID-19 death counts by sex and age. As of April 28, 2021, the CDC reported that provisionally 169,545 people aged 85+ in the United States have lost their lives to the COVID-19 pandemic. This staggering number is tragic and reflects the fact that elderly individuals have been the most vulnerable to this insidious virus. These deaths accounted for 30% of all deaths associated with COVID to date. We at NIC express our deepest sympathies to those who lost loved ones and we understand that each one of the 169,545 individuals are more than just numbers and statistics. Importantly, the death counts that the CDC reports are provisional and may be upwardly adjusted as the data is revised. They are based on the death certificates that the National Center for Health Statistics has received and coded at the time of reporting. The CDC notes that the five most recent weeks of reporting are typically less than 90% complete.
As a result of these deaths, NIC Analytics estimates that the revised projected units needed for 2021 using the same methodology as used in the whitepaper for the 85+ cohort and 30% penetration rate is 41,000 fewer units than were projected to be needed in the original 2019 analysis. These 41,000 units represent a 2.5% decrease from the units originally projected for 2021 for the 85+ cohort (1,657,868). For perspective, this volume of units is:
- Larger than the number of open seniors housing units for 29 of the 31 individual metropolitan market inventories that comprise the NIC MAP Primary Markets as of 1Q21.
- Greater than the entire open seniors housing inventory in Philadelphia (40,596 units) as of 1Q21.
Further, if we scale these 41,000 units back to the 99 NIC MAP Primary and Secondary Markets (using the same methodology that we’ve used in the NIC Investment Guide), this scales to 25,300 fewer units needed due to the loss in life from pandemic-related deaths for the NIC MAP Primary and Secondary Markets. For perspective, this value is:
- More than of all the net seniors housing absorption for the NIC MAP Primary and Secondary Markets in 2019 (nearly 24,000 units).
- 96% of the inventory growth that occurred during 2020 for the NIC MAP Primary and Secondary Markets.
- More than all the seniors housing construction starts in the last five quarters (nearly 20,900 units broke ground from 1Q 2020 through 1Q 2021) in the NIC MAP Primary and Secondary Markets.
Methodology and calculation. Considering the tremendous loss of life to COVID-19, we wanted to provide an estimate of what the impact of these deaths is to the supply projections we published in 2019. As stated earlier, the CDC provisionally reported that 169,545 people aged 85+ in the United States had lost their lives to the COVID-19 pandemic from the beginning of the pandemic through April 28th, 2021.
From the U.S. Census Bureau population projections published in 2017, the population projected to be 85+ on July 1, 2021 was 6,808,852. We aren’t yet at July 1, 2021, which means there are some people who will turn 85 between April 28 and July 1, and there will also sadly continue to be loss of life as well. We chose to use the 2021 population projection and provisional death counts through April 28 instead of using the population projection for 2020 as 2020 would not have captured the full impact of the pandemic thus far. Subtracting the 169,545 COVID-19 related deaths that occurred in 2021 from the population projection yields 6,639,307 people.
For our analysis, we used households as the unit of demand in order to use NIC’s penetration rates which are based on households. In our 2019 whitepaper, we converted population projections from the U.S. Census Bureau by age cohort through 2040 to projections of households using a conversion ratio of 1.23 persons per household for the 85+ cohort. This conversion ratio was based on the U.S. Census 2017 American Communities Survey of households and population. This shifts the population of 6,639,307 individuals 85+ and becomes 5,397,811 households 85+.
Then, we applied the same seniors housing penetration rate for households over 85 of 30% and derived a projection of 1,616,586 as the number of units that would be needed in 2021 (if the same penetration rate from the whitepaper were to be maintained). This value is less than the 1,657,868 originally projected for the 85+ group at 30% penetration for 2021 from the 2019 whitepaper.
Caveats and limitations to this analysis. There are a few caveats to this analysis. First, and as stated above, the death counts used in this analysis will likely be upwardly revised because the death measures are provisional. Sadly, more people will lose their lives to COVID-19. Second, this analysis does not consider the changes in consumer attitudes about the sector that have occurred during the pandemic, nor does it consider any potential pent-up demand bounce that could affect the penetration rates; it assumes the penetration rates remain static. And lastly, this analysis also does not take into account occupancy, it is based on population estimates, provisional death counts, penetration rates (not occupied penetration rates), and the population to households conversion factors.
Conclusions. Our thoughts continue to be with all who have lost a loved one to COVID-19 and with the staff of seniors housing and nursing care properties who continue battling the virus on the front lines. We respect and appreciate all of the hard work and constant care. The results of this analysis show that the projected units needed to service the 85-plus cohort are less than what would have been had COVID not occurred.
About Beth Mace and Anne Standish
Beth Burnham Mace is the Chief Economist and Director of Capital Markets Research at the National Investment Center for the Seniors Housing & Care Industry (NIC). Prior to joining the staff at NIC, she served as a member of the NIC Board of Directors for 7 years and chaired NIC’s Research Committee. Ms. Mace was also a Director at AEW Capital Management and worked in the AEW Research Group for 17 years. While at AEW, Ms. Mace provided primary research support to the organization’s core and value-added investment strategies and provided research-related underwriting in acquisition activity and asset and portfolio management decisions. Prior to joining AEW in 1997, Ms. Mace spent ten years at Standard & Poor’s DRI/McGraw-Hill as the Director of the Regional Information Service with responsibility for developing forecasts of economic, demographic, and industry indicators for 314 major metropolitan areas in the U.S. Prior to working at DRI, she spent three years as a Regional Economist at the Crocker Bank in San Francisco. Ms. Mace has also worked at the National Commission on Air Quality, the Brookings Institution and Boston Edison. Ms. Mace is a member of the National Association of Business Economists (NABE), ULI’s Senior Housing Council, the Urban Land Institute and New England Women in Real Estate (NEWIRE/CREW). In 2014, she was appointed a fellow at the Homer Hoyt Institute and was awarded the title of a “Woman of Influence” in commercial real estate by Real Estate Forum Magazine and Globe Street. Ms. Mace is a graduate of Mount Holyoke College (B.A.) and the University of California (M.S.). She has also earned The Certified Business Economist™ (CBE), which is the certification in business economics and data analytics developed by NABE. The CBE documents a professional’s accomplishment, experience, abilities, and demonstrates mastery of the body of knowledge critical in the field of economics and data analytics. Anne Standish is a Research Statistician in the Outreach Group at the National Investment Center for Seniors Housing & Care (NIC). At NIC, Anne is an important contributor to NIC’s analytics and has been involved in a number of initiatives focused on the analysis of NIC’s seniors housing time series data. While working at NIC, she received her M.S. in Applied Statistics from Villanova University. She also has a B.S. in Psychological & Social Sciences from Penn State Abington. Prior to NIC, she worked in a range of academic research positions. Outside of having a passion for quantitative research methods and statistical analysis, Anne also has an interest in data visualization.
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