Monthly resident fees and entrance fees in senior living and care communities remain elevated in 2024 compared with prior years, but those increases are projected to be lower heading into 2025, according to the September 2024 Ziegler CFO Hotline.
Ziegler surveyed more than 250 senior living and care chief financial officers and financial professionals about resident fee increases in 2024 and projections for 2025. This year’s report includes new data on entrance fees.
Entrance fee increases on the decline
For 2024, the survey revealed the median percentage increase in entrance fees was 5%, above the typical 3% increase seen in previous years, but down from the 2023 median of 6%, according to a blog post from Ziegler Research Analyst Megan Cunningham. Some respondents did not raise fees during 2024, whereas others increased fees up to 20% to catch up after years of lower or no increases.
Projections for 2025 show lower resident entrance fee increases — a median of 4% — heading into 2025. The maximum increase, still 20%, remains “considerably” more elevated than the projected average (4.6%), according to Cunningham.
Although respondents gave a variety of responses for what is driving entrance fee increases in the year ahead, most said that the housing market was the largest predictor of projected entrance fees, followed by capital improvements, including cost to turnover units, Cunningham wrote. Inflation, competitive analysis of the surrounding market, and increases in labor costs also influenced projections on entrance fee increases.
The majority of respondents (98.4%) indicated they increase entrance fees annually, whereas 0.5% said they raise rates twice a year and 1.1% said they increase them three or more times during the year.
When it comes to setting entrance fees, the results were a mixed bag, Cunningham noted. A large number of respondents (42.7%) said that entrance fee increases can vary across unit types and sizes. Only slightly fewer respondents (37.3%) indicated that they raise entrance fees by the same amount for every unit regardless of type or size. The remaining 20% of respondents said that increases can vary for different unit types but remain the same for every unit with the same square footage.
Monthly resident fees follow similar trajectory
Similar to projected decreases in entrance fees heading into 2025, monthly resident fees also are projected to fall next year.
When broken out by care/service level, median percentage increases in monthly resident fees were 5% across the board for independent living, assisted living and skilled nursing in 2024. Median increases for all three care levels are projected to fall to 4% in 2025.
Providers also had a variety of responses about what’s driving monthly fee increases, with increased labor costs remaining the top factor. Inflation on food, insurance and utilities was another primary driver of rising monthly fees, followed by remaining competitive in the labor market and providing employee benefits, as well as the increased cost of capital expenditures, according to Cunningham.
“Although the media presents a positive narrative on inflation, its impact has yet to be meaningfully felt in the day-to-day operations of senior living communities,” one respondent noted. “Wage growth has far outpaced reasonable standards, ultimately passing the increased costs onto consumers. Higher than average rental rate increases, level of care increases, additional fees, increased community fees, mid-year rate increase, etc. will continue until margin compression is under control.”
Approximately 3% of providers said they instituted a mid-year increase in monthly fees during 2024, whereas almost 75% said they kept open the possibility of a mid-year increase in the year ahead. Most respondents (75%) said they did not have a tiered monthly service fee, so incoming residents pay the same monthly fees as existing residents, whereas 25% said they had a tiered monthly fee for new residents.
