Senior living affordability is improving, and a growing customer base that is materially better off financially than members of previous generations could expand the penetration rate, according to the recently published NIC MAP Vision Senior Housing Outlook.
According to the report, median older adult household net worth and income have risen faster than senior living rents over the past decade, suggesting that affordability is at an all-time high and expanding. In addition, the wealthiest cohorts of households occupied by those aged 75 or more years are projected to grow significantly faster than the overall 75-plus population in the next five years.
The rapid growth of high-income households, NIC MAP Vision CEO Arick Morton said, supports the further expansion of the private-pay senior living market.
Senior living always has had a “donut hole” — the middle-market space that finds people who make too much to qualify for Medicaid but not enough to afford the current product — which was first was quantified in 2019 in a study funded by the National Investment Center for Seniors Housing & Care. And although that donut hole always will exist, Morton said the real question related to affordability is whether that donut hole is shrinking or growing. The data, he said, show that a more financially wealthy baby boomer population means that more people can afford senior living relative to previous generations.
“From a social policy perspective, affordability is a major issue,” Morton said. “From an industry viability perspective and industry growth prospects perspective, the data suggest affordability is better than ever and is set to get even better.”
According to NIC MAP Vision data, senior living rents grew by 8% from 2013 to 2022. By contrast, the median household income and net worth growth for households occupied by those aged 75 or more years grew four times faster than senior living rents, at 35%. In addition, the wealthiest cohorts of 75-and-older households also grew the fastest, suggesting overall that new senior living developments should find a rapidly growing and financially sound buyer group.
“The real takeaway is median boomer households, and the generations behind that, are in a much better financial position than the generations before them,” Morton said, adding the caveat that senior living is a local industry, so every market will be different.
With a growing awareness from policymakers and the industry about senior living affordability and the middle market, Morton said, it was important when looking at data to zoom out and determine what the data actually said.
“It’s important for people to understand that while we still need solutions for the middle market and the donut hole, we also need to keep a clear idea that people need our product, people can afford our product, and we need to make sure we develop or build enough so it’s there when they need it,” Morton said.
