There’s been a lot of talk in the longevity market about middle-income seniors in recent months. A recent NORC study looked at what they called the “forgotten middle” and found that this cohort has few options when it comes to long-term care and housing as the age. They cobble together care with support from family caregivers and often are unlikely to qualify for Medicaid benefits.
When looking at potential care needs of middle-income seniors, the research found that two-thirds will have three or more chronic conditions and a projected 60% will have mobility issues. What’s more, this gap in options for middle-income seniors is only going to grow. According to the research, 20% will be high need—the most likely to need additional supports—but most (54%) will not be able to afford senior housing.
The National Investment Center for Seniors & Housing Care (NIC) conducted additional research with NORC to explore how the senior housing industry should respond to this growing need.
This new research shows that an additional 5.9 million older adults would be able to afford seniors housing if annual costs were cut by $15,000. If average annual costs for seniors housing and care fell by just $10,000 a year, an additional 2.3 million older Americans would be able to afford it. That’s a significant untapped market for senior housing owners, operators and investors.
What’s more, as the oldest Baby Boomers reach their 80s in the 2020s, their care needs will likely drive more moves into senior housing. According to the study, that means the next 10 years present an opportunity for the industry to broaden its target market and create new housing options.
“If the sector can develop products that appeal to middle-market consumers at a price they can afford,” said Caroline Pearson, lead researcher of the study at NORC at the University of Chicago, “it will greatly expand the potential market for seniors housing and increase options for these previously underserved seniors.”
New products and approaches are critical if the industry is to capture this opportunity and provide the housing that middle-market seniors need.
“Making seniors housing accessible to more middle-income seniors in the next decade requires innovation by real estate developers, owners, operators and investors to create and deliver affordable, quality options,” said Beth Burnham Mace, chief economist at NIC.
That innovation starts with a real understanding on the needs of the middle-income seniors. Researchers say older adults a decade from now will face more challenges with mobility, manage more chronic conditions and experience significant cognitive impairment. These kinds of health needs often lead people to transition out of their homes to independent or assisted living—and will require specific types of housing and care. In addition, the demographic make up of older adults is shifting toward more racial and ethnic diversity. Accordingly, seniors housing must increasingly consider ways to make properties more inclusive and appealing to a more diverse population.
If senior housing can generate a range of new options that address these needs—and deliver them at lower costs, the industry can reach this large and expanding middle market.
The researchers offered several possible approaches for lowering costs such as offering more basic housing products; better leveraging technology; subsidizing middle-market residents with higher-paying residents; developing new pools of investors and capital providers; adapting existing properties, like malls, for new uses; more robustly engaging unpaid caregivers; and developing innovative real estate financing models. They also say that the public policies could support financing or housing options for more middle-income consumers.
Whatever the solution, experts say it needs to happen quickly. According to NIC, it would take 17 years at today’s construction rate to build the 750,000 additional seniors housing units needed to serve the middle-income market.