In 10 Years 54% Of Us Won't Be Able to Afford Senior Housing

WASHINGTON, DC—On paper senior housing is looking great considering the headwinds that demographic trends are expected to deliver. However, one question that is not often explored is perhaps the most fundamental: how will users of these facilities pay for them? The US, after all, is in the midst of a retirement crisis, with numerous studies showing that few Americans have saved sufficiently for their golden years. Now, new research released today at the National Investment Center for Seniors Housing & Care’s Health Affairs Forum in Washington, DC, explores that very topic.

It found that by 2029, the number of middle-income Americans over 75 years old will nearly double to 14.4 million and 54% of those senior citizens won’t be able to afford senior housing and care, even if they’ve committed 100% of their annual financial resources. Additionally, 60% of this population will have mobility limitations and 20% will have high functional and health care needs.

In short while the market for senior housing and care—including independent living and assisted living communities—have been expanding to address a wide-range of complex needs, these settings are often out of the financial reach of the 8 million middle- income seniors, 75+ years old.

According to the study, this new ‘middle market’ for the senior housing and care industry is a going to require both the public and private sectors to preemptively act so that these seniors can afford the housing and care they will need.

The issue

“We still have a lot to learn but what we do know is that seniors do not want to be forced to spend down their monies and spiral into poverty and we also know that America cannot currently meet their housing needs,” Beth Burnham Mace, chief economist and director of Outreach at NIC, tells GlobeSt.com. “These numbers are a wake-up call to real estate investors, developers, operators and policy makers to let them know that the future includes developing affordable housing and care options for our middle-income seniors.”

The problem becomes even more exacerbated when, for example, seniors spend down their assets in order to get on Medicaid. However, there are only so many people that can get onto the Medicaid rolls.

Typically, senior housing is privately paid for by seniors with sufficient assets. Some Americans may have long-term care insurance to defray the costs but for low-income seniors, Medicaid only covers housing in the skilled nursing facilities. However, it is increasingly beginning to cover long-term services in the home and community-based settings. Low-income housing tax credits, among other programs, have helped finance housing for economically-disadvantaged seniors.

Another problem highlighted in the report: the single home and multifamily housing market will also be affected as seniors who are no longer able to navigate their 2-3 story home or who live in, for example, a 2nd floor condominium may have to sell as their mobility issues increase. With millions of seniors currently owning property, a large portion of the US’ geographic landscape will be flooded with home sales plummeting prices, in some cases.

Potential Senior Housing

“As baby boomers age and want to remain sociable, there will need to be innovative and interesting housing options presented in the marketplace including increased co-living/co-housing options,” Mace says. For example, a younger person may rent a room from a senior, earning 50% off their rent by helping out around the house, she continues. “There could even be a living situation billed as senior workforce housing where teachers, healthcare workers, administrative assistants, among others, reside.”

It is true that some, or even many of 75+ seniors may initially resist senior housing not only because of a financial deficit but also because of life experiences, cultural norms and their specific generation’s expectations and demands. However, a lot of the country’s elderly will have no choice but to enter into some kind of senior living arrangement.

Furthermore, according to the study, these seniors eventually requiring housing will have attained a higher education and income level and will be more racially diverse. They also will have smaller families to recruit as unpaid caregivers than seniors today. Growth in the number of women will outpace men over the next ten years with women making up 58% of seniors 75+ years old in 2029, as compared to 56% in 2014.

Potential Incentives

Soon, incentives will need to be in place for developers to build affordable senior housing. The government can, perhaps, create incentives by expanding Medicare coverage of non-medical services and supports, expanding subsidy and voucher programs, broadening Medicaid’s coverage of home and community-based services, and creating a Medicare benefit to cover long-term care, Mace says.

“The study hasn’t created a solution as of yet, it is just putting a spotlight on it from a policymaker or legislative issue,” clarifies Mace. “If nothing else, this report should definitely generate a candid conversation between aging parents and their adult children about future care.”

The study was conducted by researchers at NORC at the University of Chicago, with funding provided by NIC, with additional support from AARP, the AARP Foundation, the John A. Hartford Foundation and the SCAN Foundation.