Moving from Siloed to Seamless

NIC Co-Founder and Strategic Advisor Robert Kramer has identified “Six Key Drivers” that will shape the senior living industry over the next 10 years. Kramer is also Founder & Fellow at Nexus Insights, a think tank advancing the well-being of older adults through innovative models of housing, community and healthcare. NIC Notes is publishing a series detailing each key driver. View the first five installments of the “Six Key Drivers” blog series. 

My sixth key driver shaping the future of senior living is moving from siloed to seamless. What do I mean by that?  We are moving from single-point solutions that are fragmented and partial to integrated solutions that are wholistic and person-centered. The drive is under way to connect data, people, and processes. This will fundamentally change senior living

The integration of business systems is already taking shape. Communicating and coordinating among different operating systems will be much easier for operators.

The big differentiator, however, will be our ability to provide the consumer with a seamless experience. After all, consumers judge us by the overall experience we provide. It’s the experience that counts.

This represents a great opportunity. Operators who give the consumer a personalized, integrated experience that provides housing, community and preventative healthcare will benefit in tangible ways. Residents will have a longer and higher quality of life. Families will have greater levels of satisfaction. And the staff will enjoy a more rewarding, productive working environment. That’s a huge competitive advantage.

The move from siloed to seamless will take time. A truly seamless consumer experience has a long way to go. The integration of business processes is further along, though operators still face a confusing array of software solutions.

There are single-point solutions to manage everything from back-office operations to financial performance. There are platforms to manage the workforce, sales and marketing, clinical data, and resident engagement.

As healthcare technology executive Manisha Gulati astutely points out in a recent article, more technology solutions often only create more dots rather than connections. Providers are overwhelmed.

This is true for senior living operators. They see new technology solutions as dots creating more siloed programs rather than providing an integrated seamless platform.

Operators wonder: Will the latest innovation be topped in a year or two by something better? Or by a solution that offers more integration?  It’s hard to invest in a system that may quickly become outdated.

At the same time, we need to recognize that we are at an important inflection point in the evolution of the senior living industry. The first phase of innovation has been the development of these point-in-time or episodic solutions. The next phase of innovation will be connecting the dots, moving from these individual silos to longitudinal solutions that enable communication, coordination, and meaningful integration to provide a complete health and wellness experience for the resident.

Advances are being made in the integration of business systems and their data by companies such as Eldermark, PointClickCare, MatrixCare and Yardi. We are moving from siloed to seamless.

As senior living makes this transition, what is our top priority?   

The first question we should ask is of the consumer: What matters to you? What do you want to experience in the later years of your life? The answer is our roadmap.

Older people in the years to come will expect a hassle-free, seamless experience. So will their families. The most valued service will be navigation to handle all the things the resident or family doesn’t want to deal with.

That includes healthcare. We cannot provide a seamless experience unless we recognize and proactively engage in the resident’s experience of and delivery of healthcare.

The average assisted living resident has 13 chronic conditions. As we discussed in Key Driver #4, healthcare is being reframed. The government is moving to a value-based care system. Taxpayers will not be able to fund the fee-for-service system as it currently exists as costs for the care of an aging population spin out of control.

Today’s consumer experiences a fragmented healthcare system, shuttled from doctor to doctor and to different settings with little coordination. Older people and their families are extremely frustrated. While healthcare talks about a continuum of care for the patient, the reality of the patient experience is the exact opposite. Patients, their data and their families get confused and lost as they’re sent from one silo to another.

How does senior living fit in?

We like to talk about the continuum of care, but our services are fragmented too. We often see other types of providers or settings as competitors instead of working together to provide a better experience for the older adult.

A recent hint of change came from the Aging Media Network. It just hosted a conference to connect executives from across the senior care continuum to discuss synergies. C-suite executives from different settings are exploring how to reshape care delivery to older and complex populations. Unfortunately, much of the discussion is focused on care competencies and business model requirements and not on what matters most to the individual—the older adult.

Senior living has a key role to keep people out of the hospital and to help manage their chronic conditions. If we want our residents to have more life in their years as well as years in their life, then how we provide for the management of their chronic conditions is essential.

This doesn’t mean senior living providers necessarily have to go into the insurance business or provide primary geriatric care services. But we do have an opportunity to see that our residents get those services. The move to home of healthcare services can and must include the home that is senior living.

How?

Companies are emerging that integrate the healthcare experience. I call them the integrators. American Health Partners is one example. Its business model is to provide a continuum of care that empowers people to obtain excellent healthcare that fits their lifestyle. The company seeks to deliver the right care at the right place through institutional special needs plans, senior living and rehabilitation, pharmacy for long-term care facilities, home health and hospice, among other services.

Another example is BrightSpring Health Services. It provides complementary home- and community-based health services for complex populations in need of specialized and/or chronic care. Services include supportive care, clinical and pharmacy solutions across many settings. A third example is Lifespark.

Aggregators play a role too. They aggregate the lives of high-risk Medicare beneficiaries in a local market and seek to integrate their care experience as they assume their healthcare dollar spend risk. Landmark Health, Lifespark, Curana Health, ChenMed, VillageMD, WelbeHealth, Aledade, and Oak Street Health are examples of companies doing this work. We provide an enormous potential value to them because we house the very high-risk, high-cost Medicare beneficiaries they seek to serve: their beneficiaries. They provide value to us because our residents need the healthcare they provide.

Operators can start by considering some basic questions:

• Who is providing medical services in my building? (This type of information is available through NIC MAP Vision.)
• Is any service in my market providing true care navigation and integration? Care navigators, sometimes called coaches or guides, coordinate the healthcare experience. They help the individual receive the right care, at the right time and in the right place.
• Which companies in my market are aggregating the lives of high-risk seniors who account for the most Medicare spending? They could be our partners.

Moving from siloed to seamless is a confusing and messy process. But as the future takes shape, the transformation will be worth the effort for operators, and especially for our residents.

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That brings me to the conclusion of my series on the Six Key Drivers Shaping the Future of Senior Living. I’d like to note that I’ve enjoyed getting your feedback and look forward to more of your comments. I’d also like to add that the Six Key Drivers identified in this series do not represent an exhaustive list but rather a work in progress. Other drivers, such as industry leadership changes, technology, innovation in capital structures, and environmental, social and governance (ESG) initiatives will also shape the future of the industry.

My key point is that ultimately, we must offer our next generation of residents an aspirational setting and experience. Otherwise, they will pursue other options to avoid the senior living setting. By adopting an aspirational dynamic, we can change the expectations and even the lived experience of aging, especially in our later years.

Lastly, I’ll conclude with one of my favorite quotes from Bill Gates that certainly applies to our industry. “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.”

The U.S. Bureau of Labor Statistics reported that nonfarm payrolls rose by 263,000 in November 2022 and the unemployment rate remained steady at 3.7%. The November increase was roughly the same as average growth over the prior three months (282,000), but well below the year-to-date average of 392,000 and the monthly average of 562,000 seen in 2021, and higher than the average monthly gains of 164,000 seen in 2019. Market expectations had called for a gain of 200,000 jobs. Revisions subtracted 23,000 positions to total payrolls in the previous two months. The monthly gain paints an image of a still growing, but slowing, labor market.

Today’s labor report will add further impetus to the Fed’s policy conviction of increasing interest rates. It is looking for the job market to slow significantly and for the inflation rate to be tempered before it will adjust its aggressive stance on monetary policy. In a statement this past Wednesday, Federal Reserve Chair Jay Powell indicated that the central bank is likely to raise the fed funds rate further, but by a lesser 50 basis points at its upcoming December meeting, down from 75 basis points in the last four rate hikes. Indeed, the Federal Reserve raised short-term interest rates for the sixth time this year on November 2nd. That marked the fourth consecutive 0.75 percentage point increase and followed earlier increases in 2022 of lesser amounts. The latest increase pushed the Fed Funds rate to a range of 3.75% to 4.00%, up from 0% at the beginning of the year. The rapid rise in interest rates is the most aggressive pace of monetary policy tightening since the early 1980s and is in response to inflation which remains uncomfortably high.

Employment in health care rose by 45,000 in November and has increased by an average of 47,000 per month in 2022 compared with 9,000 in 2021. Employment in nursing care facilities grew by 2,800 jobs from last month and 23,500 from year-earlier levels and stood at 1,369,500 positions. Separately, and despite headlines about job losses in tech sectors, the information sector added 19,000 jobs.

In the household survey conducted by the BLS, the jobless rate was unchanged from October and stood at 3.7% in November. In September, the jobless rate had once again fallen to its pre-pandemic level of 3.5% seen in February 2020. Both months’ unemployment rates are well below the 14.7% peak seen in April 2020. The underemployment rate was 6.7% in November, up from 6.8% in October.

Among the major worker groups, the October unemployment rates were 3.3% for adult women, adult men (3.4%), teenagers (11.3%), Whites (3.2%), Hispanics (3.9%), Blacks (5.7%), and Asians (2.7%).

Average hourly earnings for all employees on private nonfarm payrolls rose by $0.18 in November to $32.82. This was a gain of 5.1% from year-earlier levels, lower than the upwardly revised gain of 6.8% seen in October.

The labor force participation rate slipped back to 62.1% in November from 62.2% in October and was below the February 2020 level of 63.4%.

Earlier this week, the BLS released the results of its October Job Openings and Labor Turnover Survey (JOLTS report) that showed the number of job openings fell by 353,000 positions to a seasonally adjusted 10.3 million. That was below the peak of 11.9 million in March, but still well above their pre-pandemic level in early 2020 when it averaged 7.0 million. This means that there are roughly 1.7 open positions for every person looking for work in September, down from 1.9 in September, but much higher than 1.2 in 2019. The hirings rate fell to 6.0 million, the lowest level since January 2021 and the quits fell for the second month in a row to 4.0 million, the lowest level since May 2021.

“Medicaid represents over half of the revenue for skilled nursing properties. It is vital for operators and investors to pay close attention to the reimbursement trends in their states as most states do not cover the cost of care.”

– Bill Kauffman

NIC MAP Vision released its latest Skilled Nursing Monthly Report on December 1, 2022. The report includes key monthly data points from January 2012 through September 2022.
Here are some key takeaways from the report:

Occupancy

After increasing for two months in a row, skilled nursing property occupancy declined from August to September, decreasing 40 basis points to 78.4%. Nevertheless, occupancy was up 188 basis points from one year earlier in September 2021 as it continues to recover since the pandemic low of 73.0% set in January 2021. Some challenges do persist as staffing shortages continue to create difficulties within skilled nursing properties limiting the ability to admit new patients in some markets. However, the current occupancy trend does suggest that demand for skilled nursing properties is recovering, given the 172-basis point increase from January to September this year (2022). That said, occupancy remained low compared to February 2020 pre-pandemic levels of 87.2% (8.8 percentage points).

Medicare

Medicare revenue per patient day (RPPD) decreased slightly from August to end September 2022 at $572. It has declined 3.1% since January when cases of COVID-19 were increasing in skilled nursing properties. The RPPD was higher in January likely because the Public Health Emergency (PHE) was still in place and the federal government had implemented initiatives to aid Medicare fee-for-service reimbursements to help care for COVID-19 positive patients requiring isolation. Meanwhile, Medicare revenue mix declined, falling 50 basis points from August to end September at 21.2%. It has also declined since January of this year when it was 24.4%.

Managed Care

Managed Medicare revenue mix declined slightly in September, dropping 19 basis points from August to to 10.2% and 130 basis points from its recent high of 11.5% in February. However, it is up by 211 basis points from the pandemic low set in May 2020 of 8.4%. Expectations are that it will continue to increase over time with the growth of Managed Medicare. Meanwhile, Managed Medicare revenue per patient day (RPPD) decreased from $461 to $460 in September and is down 1.7% from last year in September 2021. It has decreased $117 (20.2%) from January 2012 and continues to pressure some operators’ revenue as managed Medicare enrollment grows around the country. However, some operators see managed Medicare as an opportunity for growth in patient volume.

Medicaid

Medicaid patient day mix increased to 65.1 % in September and was up210 basis points from the pandemic low of 63.0% set in January 2021. In addition, Medicaid revenue mix increased in September, representing over half of property revenue. It has increased 345 basis points from the pandemic low of 48.3% set in February 2022. Meanwhile, Medicaid revenue per patient day (RPPD) held steady at $257 in September. It increased 1.2% from $254 one year ago in September 2021.

Get more trends from the latest data by downloading the Skilled Nursing Monthly Report. There is no charge for this report.

The report provides aggregate data at the national level from a sampling of skilled nursing operators with multiple properties in the United States. NIC continues to grow its database of participating operators to provide data at localized levels in the future. Operators who are interested in participating can complete a participation form on our website. NIC maintains strict confidentiality of all data it receives.

Experts Make the Case for Senior Housing

In an uncertain economic environment, what’s an investor to do?

That question was explored during two educational sessions at the 2022 NIC Fall Conference, held September 14-16, in Washington, D.C.

At the session, “Why Now is a Good Time to Invest in Senior Housing,” experts mapped out the positive case for investment today, along with some timely caveats.

Separately, in a lively session patterned after the popular TV game show, “Deal or No Deal,” lenders and investors took a deep dive into real transactions. The format highlighted the strategies of different investors, who revealed their “Deal or No Deal” decisions by opening a replica of the show’s iconic briefcase.

Putting the senior housing market in broad context, Robert Chapin moderated the session on why to invest. “We’re in this for the long game,” said Chapin, CEO at Bridge Investment Group, with $42 billion of assets under management. “We have to make sure we have the right product to get ahead of the demand curve.”

Panelists agreed that demographic trends will continue to drive the overall investment case for senior housing over time. By 2030, all baby boomers will be age 65 or older. “We have to see through the current uncertainty,” said Adam Zeiger, director, Senior Housing Vertical, Hudson Advisors.

Today, investors face a long list of uncertainties: high inflation, rising interest rates, the overhang of the pandemic, occupancy challenges, and the possibility of a recession.

“Focus on what is in your control,” advised David Selznick, chief investment officer, Kayne Anderson Real Estate Advisors. Select markets carefully. Analyze the property’s net operating income and how to increase cash flow over time. “The key is to be disciplined and patient,” he added.

The panelists said that the higher cost of borrowing is slowing new construction starts which will eventually result in less competition—another reason to invest today. “If you can build now, you will look smart in a couple years,” said Selznick.

Ryan Companies had a robust pipeline of new projects in 2020. “We pushed forward,” said Julie Ferguson, executive vice president, Senior Living, Ryan Companies. “We knew when we opened we would be in a less competitive environment.”

Long-standing debt and equity relationships allowed Ryan Companies to continue building. But rising construction costs have been a challenge, compelling the company to focus on high-end markets that can command high rents.

Transaction volume is down for the year, the panelists noted. Rising interest rates, the war in Europe and the possibility of a recession have pushed some buyers to the sidelines. “Fear is pervasive,” said Selznick.

Another drag on transactions is the pricing mismatch between buyers and sellers. They can’t agree on valuations. Owners who can afford not to sell are waiting to see if the market improves.

Investors face other challenges. Underwriting transactions is tricky. Labor costs and other expenses are hard to predict.

Also, the recovery from the pandemic is uneven. Some markets are regaining occupancy faster than others. “We focus on where we can build and be successful,” said Ferguson. She explained that Ryan Companies analyzes the local labor market, gauging unemployment rates and wage trends. Consumer demand is another big factor. The company evaluates where customers are coming from. The pro forma document stress tests underwriting assumptions.

Kayne Anderson focuses on markets with high levels of in-migration and high net wealth. Bolstering the case to invest in senior housing, Selznick added that the pandemic demonstrated the importance of socialization for older adults. “Senior housing is the most helpful setting,” he said.

The panelists addressed the question of whether investors will have pricing power in the next 24 months. Recent price increases have generally been accepted by consumers. At the Ryan properties, rents are up 8-10% and the cost of care is up 15%. “Families get it,” said Ferguson, adding that operators are prepared to talk about the need for price increases with consumers.

In the near term, the panelists expect revenue to grow and expenses to moderate. The consumer will absorb some of the higher costs for labor and other expenses.

Low levels of new construction will help margins rebound over the next few years. “If you plan to hold a property for five to seven years, you should be buying senior housing today,” said Selznick.

“Deal or No Deal”

Debt and equity lenders, and owners took the stage for the “Deal or No Deal” session. The panel was moderated by Ben Firestone, CEO & co-founder, Blueprint; and David Harper, senior vice president, Originations, Capital One.

Panelists gave their perspective on several case studies. For example, National Health Investors, a senior housing REIT, is focused on cash-on-cash yield to enable the payment of dividends to its shareholders, according to Michelle Kelly, senior vice president at the REIT.

Equity sources—represented on the panel by Dana Scheppman, vice president, PGIM Real Estate—are more patient, willing to wait longer for solid returns. Meanwhile, lenders are concerned about debt service coverage. Banks want to understand the borrower and check their assumptions, said panelist Chris Taylor, managing director, Capital One.

The “Deal or No Deal” case studies highlighted different types of properties. Stand-alone memory care is difficult to underwrite. A value-add property could be good deal but may also be too risky in this economic environment.

The panelists agreed that the deals might have been slam-dunks three years ago. Now, there’s more to consider with the rising cost of capital and higher expenses. “There are a lot of moving parts,” said Kelly.

This article originally appeared in the “Emerging Trends in Real Estate® 2023” report issued by the Urban Land Institute and PwC. Data cited in article as of original publish date; more current data may be available. 

Major factors influencing senior housing continue to evolve. Some trends are well known while others are still developing. In 2022 and into 2023, trends for senior housing include the following:

1. The growth of the sector into new product types differentiated by rate and service offerings as the sector continues to mature and evolve.
2. The articulation of a new value proposition for senior housing as the proverbial “fountain of youth” for future baby boomer residents who seek a high quality of life, wellness, longevity, and purpose.
3. The recognition that senior housing is truly part of the health care continuum.
4. The gradual recovery of occupancy from the nadir reached during COVID-19, boosted by a recent slowdown in inventory growth and strong post-pandemic demand patterns.
5. Outside exogenous factors including the national and global economies, inflation, and rising interest rates, which present new challenges for senior housing.
6. Staff recruitment and retention as well as rising expenses associated with labor shortages, insurance, food, energy, and other goods and services. Collectively, these are squeezing operator margins, investment returns, and debt issuance.
7. And, of course, U.S. demographic patterns, which are pushing greater numbers of individuals into the 75-plus cohort, creating a captive pool of potential new residents for senior housing.
8. These and other topics will be further explored in this commentary.

Sector maturation. It is an exciting time in the senior living industry as the sector matures and product offerings become increasingly differentiated. Much like the hotel industry, with offerings from Motel 6 to the Ritz-Carlton, operators, developers, and capital providers are increasingly segmenting the senior housing market by both price point and service offerings. “Active adult” offers amenitized rental housing for the “younger old” cohort seeking community involvement, lifestyle, purpose, and connection. The “Forgotten Middle,” a term coined by the National Investment Center for Seniors Housing & Care (NIC) in its 2019 seminal study that assessed and quantified the need for more affordable housing and care options for middle-income seniors, offers care and housing options for the value-minded older adult consumer. And “ultra-luxury retirement communities” offer older adults high-end concierge lifestyle living options with wellness centers, five-star culinary options, entertainment, and A-list cultural events. And, of course, there remains the traditional senior housing product, with a price point that falls between the latter two and offers a value proposition of security, socialization, engagement, room and board, care coordination, and lifestyle

Wellness value proposition. Many operators are increasingly recognizing that senior housing provides an environment that can promote and support health and wellness, enticements to the baby boomers as they age and seek the proverbial “fountain of youth.” Further, the movement of many operators to incorporate wellness programs into their offerings has the ability to be a significant competitive advantage as potential residents seek communities that hold promise to improve the quality of their life through programs focused on the intellectual, physical, social, spiritual, vocational, emotional, and environmental dimensions of wellness as defined by the International Council on Active Aging (ICAA).

Senior housing as part of the continuum of care. Simply stated, senior housing operators influence social determinants of health for hundreds of thousands of older Americans. Operators can help manage chronic illness and keep older adults healthy—they have 24/7 eyes on residents and can systematically monitor changes in conditions. Properly managed, this can result in fewer resident hospitalizations, reduce federal and state-level health care spending, and act as a catalyst for future business opportunities and collaborations. Further, thoughtful care intervention can provide support to the overall health care ecosystem through the support and creation of conscientious awareness and follow-through. And, once senior housing is fully recognized as part of the health care continuum, senior housing operators will be able to participate in the revenue streams associated with a capitated risk-sharing model of care.

Tailwinds for occupancy recovery. There are two tailwinds supporting an ongoing occupancy recovery for senior housing. First, on the supply side, the number of senior housing units under construction in the second quarter of 2022 for the 31 NIC MAP Primary Markets was the fewest since 2015. And that pattern may remain in place—at least in the near term—because senior housing starts continue to linger at moderate levels and remain well below their peaks seen in the 2016–2018 period. This is because rising materials prices and inflation, labor shortages in the building trade industries, and the change in Fed policy of higher interest rates are collectively affecting plans for new development; many projects increasingly do not pencil out for reasonable returns.

Second, demand is also a tailwind for an ongoing improvement in occupancy. Indeed, demand, as measured by the change in occupied inventory or net absorption, was robust in the second quarter of 2022, increasing at its strongest pace ever recorded by NIC MAP Vision except for the post-pandemic boost in demand in the last half of 2021. Since the recovery began in the second quarter of 2021, 78 percent of the units placed back on the market have been reoccupied.

As a result of these conditions, the occupancy rate for seniors housing—where seniors housing is defined as the combination of the majority independent living and assisted living properties—rose 0.9 percentage point during the second quarter of 2022 to 81.4 percent for the 31 NIC MAP Primary Markets. This marked the fifth consecutive quarter where occupancy did not decline. At 81.4 percent in the second quarter, occupancy was 3.4 percentage points above its pandemic-related low of 78.0 percent recorded in the second quarter of 2021 but was 5.8 percentage points below its pre-pandemic level of 87.2 percent in the first quarter of 2020.

Outside influencing factors. Looking ahead, several exogenous factors will influence the strength of net move-ins and demand. These include demographics (as discussed further below) as well as the following:

1. The broad performance of the U.S. economy,
2. Consumer confidence (very low, according to the University of Michigan survey),
3. The rate of inflation (the Consumer Price Index increased by 9.1 percent from year-earlier levels in June 2022, resulting in the largest increase since 1981),
4. Interest rates (rising as the Fed tightens monetary policy and increases the fed funds rate),
5. The pace of sales for residential housing (slowing from higher mortgage interest rates),
6. The stock market (considered in a bear market),
7. Pent-up demand for senior living settings (strong through the second half of 2022),
8. Development currently underway (moderately paced compared with history),
9. New competition in the form of recently opened properties since the pandemic began, and
10. Local market area demand and supply pressures.

Staffing challenges. Importantly, labor also is a key consideration, with an increasing number of operators citing labor shortages as a potential limiting constraint on growth. In the WMRE/NIC Investor Sentiment Survey conducted in June 2022, just under half of respondents (41 percent) reported that labor shortages have caused a reduction in the number of operating units/beds in their portfolios. This is presenting challenges for operators seeking to maintain census, much less grow and expand.

Indeed, the U.S. jobless rate was low at 3.6 percent in June 2022 and was only 0.1 percentage point above the pre-pandemic level of 3.5 percent seen in February 2020. Further, tight labor market conditions are pressuring wage rates up quickly, especially for workers in skilled nursing and assisted living properties.

While good for employees, low jobless rates present challenges to employers who must staff their businesses. Surveys conducted by the NIC among C-suite operators of senior housing and care properties highlight strategies to combat labor shortages and include raising wages, offering flexible work hours, higher pay frequency, improving the work environment and culture, recruitment programs comparable to those used to market to new residents, and collaboration with educational institutions.

Expenses, margins, and returns. Rising wage costs associated with temporary agency workers, overtime hours, and sick leave associated with COVID-19 have combined with dollars expended on personal protective equipment (PPE) and rising insurance costs to put significant pressure on expenses. Rent growth, while rising, has not been sufficiently able to offset expense growth for many operators. As a result, net operating income (NOI) has been hard to achieve for many—but certainly not for all—operators of senior housing properties.

COVID was particularly hard on the senior housing sector. Many investors had reduced their appreciation expectations for senior housing as the impact of the coronavirus weighed heavily on their view of the sector. According to NCREIF Property Index (NPI) investment return data, short-term total returns for senior housing were low at 1.08 percent in the first quarter of 2022 compared with the broader NPI, which saw total returns of 5.33 percent in the first quarter. Appreciation returns for the NPI dwarf those of senior housing, since the NPI was boosted in part by outsized returns in industrial properties (10.96 percent). The senior housing income return in the first quarter was 0.91 percent, its best showing since late 2020. This was stronger than industrial and nearly on par with apartments, and slightly less than the NPI (0.99 percent).

Nevertheless, on a longer-term basis, the 10-year return for senior housing was the strongest of the main property types except for industrial. For this time frame, the income returns for senior housing (5.47 percent) surpassed the NPI (4.83 percent), while the appreciation return (4.49 percent) was slightly less than the NPI (4.61 percent).

Demographics favor senior housing. The demographics supporting senior housing cannot be denied, as the number and share of older adults continue to grow. For example, the number of persons 82 or older—often the age of a resident moving into senior housing—is growing at an accelerating pace. In 2022, there were 10.6 million Americans aged 82 and older; by 2026, this is projected to grow to 12.3 million, and by 2030 to 14.8 million, according to the U.S. Census Bureau. Further, in the not very distant future, the ratio of adult children family caregivers (those aged 45 to 64) who are available to take care of aging parents (those over 80 years of age) will continue to shrink at a precipitous pace from 7:1 in 2015 to 6:1 in 2022 to 5:1 in 2026 to 4:1 in 2031 and to 3:1 in 2044.

With fewer family members and spouses available for care (divorce rates are high for older adults), congregate settings will indeed get a further demand boost. In addition, the increasing segmentation and differentiation of senior housing in serving the vast numbers of seniors in middle-income cohort will add a large demand pool for operators to serve, as will the movement of “younger old” aging adults into the active adult segment. With an industry penetration rate of roughly 11 percent of U.S. households, the penetration rate does not need to increase dramatically for occupancy to rise to pre-pandemic levels.

Looking ahead, there are many reasons to be optimistic about the outlook for senior housing, but the path forward may be a bit bumpy due to the prevailing winds in the broader economy. Inventory will continue to expand, although at a reduced pace in the near term, which should act as a tailwind for occupancy improvement. And, while demand may also be affected by economic headwinds, the value proposition of senior housing—security, socialization, engagement, room and board, care coordination, and lifestyle—remains in place and ultimately should win the day by attracting new residents for senior housing properties. In addition, the movement of many operators to incorporate wellness programs into their offerings has the potential to be a significant competitive advantage as potential residents seek communities that hold promise to improve the quality and length of their lives.