Tax Code Changes Could Boost Seniors Housing Occupancy, Says Marcus & Millichap

CALABASAS, Calif. — Recent changes to the U.S. tax code have made homeownership less advantageous to taxpayers, which could spur more seniors to sell their homes in favor of seniors housing communities, according to a research report by Marcus & Millichap.

The Calabasas-based brokerage, finance and research firm suggested that an increase in the standard tax deduction could be the key to this trend. Fewer seniors will need to itemize tax deductions, including homeownership-related expenses such as mortgage interest payments. With the tax benefits of homeownership reduced, seniors deciding whether to sell their homes may be nudged toward rental communities.

“A healthy housing market and benefits from itemizing housing-related expenses fall under new rules that could entice additional seniors to sell homes and use proceeds to live in smaller, age-restricted housing communities,” states the report.

Homeownership has already been sliding in recent years for those over 75 years old, following a peak of 80 percent in 2013. Construction in seniors housing, meanwhile, has been feverish as the industry prepares for the demographic wave of aging baby boomers. That is to say, seniors are becoming less interested in owning homes at the same time that a variety of rental seniors housing options are reaching completion.

This all comes at a time when seniors housing could desperately a boost in occupancy. In the first quarter of 2018, assisted living occupancy hit an all-time low of 85.7 percent, according to the National Investment Center for Seniors Housing & Care (NIC). This is a trend that will continue into the immediate future, according to the Marcus & Millichap report.

“In 2018, the number [of assisted living units under construction] remains above historical norms, though the figure is down approximately 5,000 units from the peak last year,” says the report. Developers in the segment are preparing for an increase in demand as the baby boomer generation ages into their senior years. Downward pressure on the overall occupancy rate will persist.”

The report predicts that during 2018 independent living occupancy will drop 20 basis points, assisted living occupancy will drop 50 points and skilled nursing occupancy will drop 80 basis points. Marcus & Millichap had a sunnier outlook for continuing care retirement communities (CCRCs), predicting a 30-basis-point increase.

“A balance between supply and demand in the CCRC segment will persist this year, keeping occupancy around 91 percent,” says the report. “Stable occupancy trends will facilitate another year of 3 percent growth in the average asking rent and entrance fees will continue an upward advance.”

To view the full report, visit http://www.marcusmillichap.com/research/researchreports/reports/2018/03/19/national-seniors-housing-research-report

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