WASHINGTON, DC — Meeting middle-income older adults’ needs for housing and services involves many challenges and opportunities, and senior living and care operators must be part of the solution, according to experts who came together Tuesday at the National Investment Center for Seniors Housing & Care’s 2024 Fall Conference to discuss a variety of models that are working.
At the second day of the NIC conference, a panel of operators and financial experts explored the specific market segments through which they serve middle-income individuals, detailed their delivery models, and shared their experiences and strategies for navigating a challenging but necessary offering.
Cardinal Senior Management CEO Joe Pohlen said that his company seeks buildings that no longer serve the Class A market, acquiring them at a price significantly below replacement costs and rehabilitating them to serve middle-income assisted living and memory care residents.
Jon Fletcher, senior vice president of Presbyterian Homes and Services, said that his company focuses primarily on independent living but also provides assisted living, memory care and skilled nursing services, as well as home- and community-based services.
As a nonprofit, he said, the company is able to focus more holistically on its entire portfolio. Two-thirds of its housing is affordable for middle-income residents, with 20% devoted to low-income residents and 20% set aside for market-rate housing, Fletcher said.
The majority of Presbyterian’s middle-market communities are new construction, he said, adding that although developing middle-market properties is “incredibly challenging,” Presbyterian works to give its communities the same look, feel and touch as market-rate properties. Because it is a nonprofit, he said, Presbyterian has the luxury of not raising rents as high as the market will bear, taking a 1% to 2% spread every year. The result, Fletcher said, is high occupancy — Presbyterian has 94% occupancy across all senior housing types — low turnover in residents, and margins that continue to increase, fueling the organization’s ability to reinvest proceeds back into more middle-market housing.
“Efficiency is key,” Fletcher said, adding that the company works to be efficient in operations, programming, staffing levels and other areas. The organization, he said, also provides most services a la carte, allowing residents to make their experience as affordable as they want or need, which Fletcher said increases resident length of stay.
Necessary work
Elevation Financial Group CEO Chris King said that the small number of senior living communities for affluent individuals have a lot of competition, and there also are well-defined, government-involved properties serving lower-income individuals. But the “giant middle” is where most people live and want to live, he said, and there are few current private solutions to this public policy issue.
Elevation, King said, tries to reimagine or reinvent “broken communities” that failed, trying to make them attractive and affordable to a customer on the low end of middle income. He described Elevation’s value equation as safe, clean, elegant and affordable housing with an increased unit size, reduced common spaces, and the addition of kitchens, bringing properties back to life. As a provider of independent living, King said, Elevation works with partners to provide amenities, management and experiences.
“There is huge demand and very limited supply,” he said, adding that the work is not glamorous and is challenging, but it also is necessary.
Making it work
With limited staffing in middle-market communities, the panelists said, finding the right staff members is key to making the model work. Pohlen said that quality executive directors are “crucial to developing leadership in buildings and the most impactful.
“There is no such thing as a bad building,” just bad leadership, he said, adding, “If you can get the team right, the returns will take care of themselves.”
Fletcher said that no one secret to success exists in serving the middle market, but the right staffing and operational efficiencies will go a long way. Government actions that could help the sector, he said, include a supportive regulatory environment that does not add excessive costs, and the expansion of the definition of affordable senior housing to include some components related to the middle market, to increase available funding.
Susan DiMickele, president and CEO of National Church Residences, moderated the session and said she is not optimistic that the federal government will devise a policy solution to address the need for affordable senior housing. The industry, she added, is at a crossroads, but the panelists showed that some operators are having success.
“Will the private sector rise to the occasion, or will it wait for a crisis where a divided government will impose a solution we don’t like?” DiMickele pondered.
The conference continues through Wednesday.
