A severe shortage of senior housing is emerging just as the nation’s 80-and-over population is projected to jump by more than four million, reaching 18.8 million by 2030. The demographic surge signals a major long-term opportunity, but as several experts told GlobeSt.com, the short-term reality points to anything but a construction boom.
“Projections of unit shortages, combined with high land, labor, and financing costs, have made ground-up development increasingly challenging,” said Patrick Elder, a shareholder in Polsinelli’s real estate group, which includes health and healthcare-related assets. As previous GlobeSt.com analysis of Producer Price Index data shows, final-delivery construction costs have climbed more than 40% since 2019.
“Across the board, it's hard to get debt and financing for new construction generally, but for senior living, it's really, really hard,” Elder said.
“It's just not happening very much.” He noted that both lenders and equity partners have become far more selective, pulling back from new development deals in the sector.
While new supply is constrained, opportunities are emerging elsewhere. Some owners unable to refinance are putting assets on the market, creating selective buying prospects.
“It's not the frenzy that was five years ago,” Elder said, but properties are being recapitalized and repositioned. At the same time, he added, there are still lenders “willing to fund the right projects” and capital sources looking for carefully structured investments.
Elder cautioned that senior housing plays differ significantly from traditional real estate investments.
“Pre-Covid, senior housing was a shiny new object,” he said.
“Institutional money viewed it more like a real estate investment. But senior housing is definitely a hybrid—more of a healthcare business because of the regulatory issues you wouldn’t face with an apartment complex, office building, or retail property.”
The level of state and federal oversight depends on the property type—independent living, assisted living, memory care or skilled nursing—but compliance adds layers of operational complexity.
“There's a lot of oversight that, through an investor's lens, you don't have in another type of real estate,” Elder told GlobeSt.com.
He emphasized that partnerships with experienced property management firms are critical, especially those with deep expertise in healthcare operations.
“If you haven't invested in senior living, you need to view it differently from other types of real estate investments—and you need to do your homework,” Elder said.
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