Finding Your Path
The Seniors Are Coming! The Seniors Are Coming!
By Lorne Polger, Senior Managing Director
Well, we’re not getting any younger! We see it every day when we look in the mirror and conversations with friends increasingly turn to “what’s next for mom and dad?” I’ve reached the point where I’ve been discussing future housing options with my folks and we’re far from alone. That process has been really eye opening on a number of levels.
One of the most significant demographic trends is our aging Baby Boomers (increasingly seniors) and their housing transition. Boomers, those born between 1946 and 1964, number 76 million. By 2020, Boomers will be pre- and early-retirement ages (55 to 64 years) and the young old ages (65 to 74 years). The Social Security Administration estimates that 9,600 people a day are turning 65 in 2015, up from 7,800 a day in 2010. Today, 6.1% of the population is over 75, and by 2030, that’s expected to grow to 9.5%. In 1994, 3.5 million Americans were age 85 or older; that grew to 5.8 million in 2012 according to the U.S. Census Bureau and by 2040, it is expected to increase to a whopping 14.1 million.
According to the National Investment Center for Seniors Housing & Care, an Annapolis, Md., nonprofit organization that tracks the senior market, the senior housing segment fell off a cliff during the recession, along with the rest of the housing market. It has since bounced back, but since 80 is the new 65, it may take a few more years for demand to fully crank up, because the target population segment may choose to stay in their homes longer than previous generations did. The stigma often associated with traditional nursing homes (stark semi-private rooms, shared bathrooms, etc.) still looms over this sector, and while the majority of existing stock is obsolete, new options are becoming more readily available. With people living longer, there is a gray period that could last decades when seniors can live semi-independently. This factor has altered the makeup of 55+ developments in recent years.
Predicting what type of living arrangements seniors will seek out as they age, and when they may need senior housing, particularly given longer lifespans and changing attitudes about such types of housing, is a challenging task. The options are varied, both in terms of amenities and expense levels. Today, people may be able to continue to live independently, long past the time that we used to think was the “right time” to send sweet Aunt Edna off to the senior home. Perhaps they want to downsize, but can no longer easily accommodate multi-level housing due to health issues. They may be considering moving into communities that provide special services to seniors but are fearful of increased costs or potential loss of independence. These trends suggest a growing need for various types of transitional housing for our aging community. But we have plenty of affordable housing options for our senior community, right? Think again. Plenty of choices but they’re all rather expensive.
Below are the most common senior housing options available. It may be helpful to think about each in terms of you or your parents’ situation.
Staying in the Home
Perhaps the most obvious choice for many seniors is to simply stay put. Certainly from an emotional standpoint, staying in your home may be the most comfortable alternative, as change is difficult, even more so as we age. And while on the surface this may make the most economic sense, there are physical, emotional and potential economic downsides, and various decision trees as a result. Do they have the ability and economic wherewithal to maintain and adapt their residence? Whereas a senior facility will generally have adaptive elements in parts of the home, that may not be the case in one’s existing residence. While certain things can be changed at minimal cost (tub access, grab handles, etc.), other elements (i.e., stairs) may be more difficult or costly to adapt. Do they have the ability or desire to continue to prepare their own meals? Do they need some assistance in the home? Although assistance in the home is readily available from various agencies, the costs of hiring home help can be significant (maybe more than the cost of a senior facility).
While not all seniors may need the full array of programming options typically offered in a senior community, there can be an increasing element of isolation for seniors living on their own, especially if they are no longer able or willing to drive or are far from various medical or social needs. So as with all of these options, there are both pros and cons depending on each individual situation.
Independent Living Communities
Senior independent living communities cater to those who are generally healthy and remain independent. Typically, residents live in fully equipped (i.e., full kitchen) private apartments or casitas. Dining services are generally offered and residents can typically choose to pay for a specified number of meals per day. Transportation and housekeeping services are available. Amenities usually include cultural, educational and entertainment programming.
Independent living communities are also known as retirement communities, congregate care, retirement villages, 55+ communities, senior apartments and continuing care retirement communities.
Financially, there are generally three types of programs available: Direct ownership of a residence, a buy-in program with a percentage rebate upon transfer or death and pure rental. In the first two cases, there are typically large homeowners association fees. In all three situations, housing costs are covered privately, and although there is some government funded programs, options are limited.
There is a very large price difference among independent living communities. In San Diego, for example, the median monthly rent in coastal areas for a couple range from $4,000-$10,000. Not an insignificant amount for those on a fixed income, especially since they have other monthly expenses that will need to be covered (medical, insurance, auto, entertainment, travel, etc.).
Assisted Living Communities
Assisted living communities are designed for those who are no longer able to live on their own, but do not require the high level of care provided in a nursing home. Assistance with medications, activities of daily living, meals and housekeeping are routinely provided. Residents live in private apartments which frequently have a limited kitchen area. Staff is available 24 hours per day for additional safety. Most assisted living communities provide licensed nursing services. Social activities and scheduled transportation are often available. A special memory care or Alzheimer’s unit is available in some, but not all communities.
Financially, this is mostly private pay, although some take Medicaid. Given the additional care, the cost of assisted living communities is generally greater than that of an independent living community.
Nursing homes (also known as convalescent care, nursing centers, skilled nursing and long- term care facilities) provide around-the-clock, skilled nursing care for frail patients who require a higher level of medical care and assistance. 24/7 skilled nursing services are provided by licensed nurses. Many nursing homes now provide short-term rehabilitative stays for those recovering from an injury, illness or surgery. Long-term care residents generally have high care needs and complex medical conditions that require skilled nursing services. Residents typically share a room and are served meals in a central dining area unless they are too ill to participate. Activities are also available. Some facilities have a separate unit for memory care or Alzheimer’s residents.
Payment sources include private pay, private long term care insurance, Medicare and Medicaid. Not surprisingly, given the added care elements, the cost of nursing homes is generally greater than that of independent living and assisted living communities.
In addition to folks living longer and staying in their homes longer, another key trend is in this space is continuity of care. An increasing number of facilities now offer care throughout the spectrum, so that a resident can “age in place” (i.e., transition from independent living, to assisted living, to possibly nursing care or memory care, all within the same facility so that they have minimal disruptions both physically and socially during the transition periods).
As noted above, the costs of all of these housing options are high, and rising. Clearly, a significant portion of the aging population will not have the financial means to meet these costs. Is this a looming crisis? Possibly. Have we properly planned for it? Probably not. That will likely be more fodder for the elections of 2020 and beyond, but it’s certainly not too early to start talking about it with your parents and grandparents, and to begin planning for it.
We haven’t invested in senior housing yet here at Pathfinder, but many of our friends and associates are long-time players in the space. The trends and demographics suggest that this may be an attractive real estate sector. Well, it’s getting late (4:30 p.m.), so I’m heading out for the early bird dinner.
Lorne Polger is Senior Managing Director of Pathfinder Partners, LLC. Prior to co-founding Pathfinder in 2006, Lorne was a partner with a leading San Diego law firm, where he headed the Real Estate, Land Use and Environmental Law group. Reach him at firstname.lastname@example.org.