Since early 2020, the U.S. economy and labor markets have been on a bit of a roller coaster ride. We endured the “Great Resignation” with escalating wages and tight labor markets. At the same time, inflation surged in 2021 and didn’t start to decline until late 2022. NIC conducted analysis specifically comparing cumulative rent growth and cumulative wage growth within assisted living. This analysis reflects growth metrics from the first quarter of 2020 through the third quarter of 2024.
As displayed in the following graph, assisted living asking rent growth has generally lagged the pace of assisted living wage growth in recent years. As a reminder, the assisted living production, nonsupervisory staff make up roughly 80% of the wages within assisted living.
Interpretations and Implications
Does this data suggest that operators should respond and implement widespread, aggressive rent hikes? No, of course not. Rents have always been driven by a combination of factors. When operators face significant increases in operating costs, what is to be passed on to existing and future residents versus what can be absorbed by the organization needs to be determined. The sector did implement larger increases during the high-inflationary years and generally, the consumer accepted those increases knowing the backdrop of the overall economy.
What is to be seen is how rent growth will pace in the year or two ahead. In 2025, seniors will have the lowest social security cost of living adjustment in four years. How will this play into rent growth? Is there a ceiling with how much a senior is willing to pay? How does the overall affordability of the housing market play into comparative costs of senior housing?
If nothing else, this information provides insights into the dynamic between these two revenue and expense forces. NIC will continue to track and report rent statistics against measures such as wage growth, consumer price index (CPI), social security increases, and other helpful benchmarks.