Middle income seniors don’t have a wealth of senior living options. Either they don’t have enough money to afford a market rate community, or too much to qualify for an affordable place.
To address this widening gap, a panel of experts explored innovative solutions at a recent NIC webinar. About 1,000 people attended the February 1 session, which highlighted the business opportunity for industry stakeholders.
“The middle market has been underserved,” said Bob Kramer, co-founder and strategic advisor of NIC. “We need practical solutions for this huge and growing cohort.”
The session was led by NIC Head of Research & Analytics, Lisa McCracken. She was joined by Ryan Brooks and Caroline Clapp, both senior principals at NIC. They reviewed recent research to provide context for the discussion.
The shortage of senior housing for average Americans was first identified in NIC’s 2019 study, “The Forgotten Middle.” It was updated in 2022.
The number of middle-income seniors by 2033 will grow to 15.9 million, accounting for 44% of all seniors. About half will have chronic health conditions or mobility limitations. But only 2.2 million will be able to afford assisted living.
Due to a number of factors, middle market seniors face the dual burden of housing and care. “The private and public sectors have a lot of work to do,” said Clapp. The opportunity for the industry is to create a less expensive senior living model. “As the price point goes down, the potential market goes up,” said Brooks.
Defining the Middle Market
Middle income seniors are not all the same, cautioned Kramer. “There is no one-size-fits-all solution.”
The middle market can be divided into three income segments ranging from 60-150% of area median income (AMI). Kramer challenged providers to ask themselves:
* What part of the market are you seeking to serve?
* What level of services will you provide?
* What are the payment sources?
* What are the barriers to scale?
Financing a sustainable model is a big hurdle. A recent Milken report suggests four strategies: 1) Repurpose distressed properties; 2) Create a revolving loan fund; 3) Establish a value-based care delivery and payment model; and 4) Launch a senior housing-payer pilot partnership.
Two panelists presented their successful approaches.
Presbyterian Homes & Services targets the higher end of the middle market. “We maintain tight efficiencies and staffing ratios to bring down rents,” said Jon Fletcher, senior vice president at the organization. The goal is to tie increases in rents and expenses to the Consumer Price Index (CPI), so apartments remain affordable.
Innovation Senior Living repurposes distressed properties, growing in number post COVID. Buildings purchased at reduced prices can keep rents affordable, according to Pilar Carvajal, founder & CEO at Innovation. She also partners with healthcare and community service providers.
Panelist Lundat Kassa, vice president at Bellwether Enterprise Real Estate Capital, said that financing in today’s capital constrained market takes creativity. Lending sources are available, but public-private partnerships are needed to scale successful models.
McCracken wrapped up the session with a lighting round question. What key lever would produce more middle market senior housing?
Suggestions were to repurpose more underperforming properties and expand the definition of affordable housing used by policy makers to include the middle market.
More public subsidies and social impact investors are also needed. “We have the opportunity to solve this crisis,” said Carvajal.
About NIC
The National Investment Center for Seniors Housing & Care (NIC) is a nonprofit 501(c)(3) organization whose mission is to support access and choice for America’s seniors by providing data, analytics, and connections that bring together investors and providers.
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