The oncoming demographic wave of seniors won’t be able to pay current prices
By Jess Stonefield, Senior Living Fund
As investors around the world continue to pour money into private senior housing, many of today’s aging are wondering who will pay for them to live there.
The average cost nationally for a private assisted living facility is nearly $4,000 per month, according to A Place for Mom. That cost rises to more than $6,000/month for private nursing home care. Meanwhile, almost half of adults ages 65+ make just enough to afford basic expenses. And that’s today.
Costs and expenses are expected to be even more staggering in the next 10 years. So, what’s to be done about it?
Breaking Apart the Demographics
On one hand, seniors housing developers got it right: there is a growing demand for quality housing. And it’s a crisis that is only going to increase as we approach the largest demographic shift in history.
By 2035, nearly 30 percent of U.S. households will be headed by someone 65 and older. Our 80-and-older population will double to 24 million.
Where they got it wrong was assuming everyone who needs high-quality housing will be able to afford it.
Indeed, the overwhelming majority of seniors housing communities being built today are being created by for-profit companies — and of the housing created by nonprofit communities, less than half is considered “affordable housing.”
The truth is, the demand for senior housing needs to be viewed through the lens of affordability, not just overall space. For instance, almost 30 percent of Americans over 55 years old have no retirement savings. And for those who do, the median value is $104,000.
Assuming life expectancy to be 80 years, that won’t last long given the cost of housing today, nevertheless the projected costs 10 years from now.
In Virginia, for instance, the median cost for assisted living care is $41,775 a year according to a Genworth Financial long-term care survey. In 10 years, it will be more than $68,000. The annual cost for a private room in a Virginia nursing home is $82,125, and will rise to more than $133,000 in the next decade.
Given median retirement savings, many Americans would only be able to afford to stay in assisted living in today’s market for about two years.
When we look at the seniors housing being created, and the true demographics of those who will need that space, it becomes clear that investors, developers and operators may be creating a glut of housing that today’s (and tomorrow’s) aging will not be able to afford. So, what do we do about it?
- 1) Educate private investors. We need to educate private investors about the need for affordable housing — not just housing with higher profit margins. After all, they themselves stand to lose on their investment when a glut of high-cost, low-occupancy communities hits the market.
- 2) Incentivize these investments. We need state and local governments to step up and recognize the value of affordable housing for their communities. Indeed, not only do nonprofit communities often provide higher care, they also generally have higher staff-to-patient ratios, ensuring higher care quality and more job growth.
- 3) Demand more assistance. Right now, HUD helps 900,000 aging Americans live in affordable housing. Meanwhile, the waiting list for housing in Philadelphia alone was capped at more than 100,000. The wait for public seniors housing in some parts of Chicago is more than two years. In New York, it’s more than four. Clearly, we need more safe, comfortable and affordable places for our aging population to live — and soon.
- 4) Shift the conversation. Instead of talking about the number of seniors who will need assisted living in future, talk about the real people (including their income and lifestyle) that will need this housing. Our aging are not simply a demographic. They’re a community who need care, just as we will when we get older.
- 5) Look beyond the market study. As expected, investors, operators and developers typically chose to create communities in areas with high income and high levels of aging. On the surface, that absolutely makes sense. But what happens 10 years from now when folks outside those pockets of wealth have nowhere to stay? It’s on all of our shoulders to ensure all seniors have quality housing, not just those with the best retirement accounts or wealthy children.
- 6) Anyone investing in a need-based market has the responsibility to focus on that need—not just the market itself. Why? Because it’s the right thing to do. In this case, the real need is for affordable housing.
It’s time for investors, operators, and developers to step away from the profit margin and come back to center, making compassionate care for aging Americans the priority when creating senior housing developments.
Jess Stonefield is a contributing writer on aging, senior care, and the greater longevity economy for publications such as Forbes.com, Next Avenue, and Changing Aging. She is a communications expert for Senior Living Fund.