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Pent-Up Demand, Aging Population Refuel Pandemic-Ravaged Senior Housing Market

Senior living rent increases are outpacing inflation as the industry approaches its early 2020 fundamentals, encouraging investors that formerly avoided one of the nation's most pandemic-impacted asset classes.


Investors bet billions and developers overbuilt in anticipation of baby boomers aging into the need for higher-level care only for coronavirus deaths to mount near the turn of the decade, bringing occupancy down to 77.8% by early 2021, The Wall Street Journal reported.

Reports of skyrocketing deaths and photos of isolated residents infiltrated the media, creating a lasting hesitancy for aging boomers to move out of their homes. Those effects are now fading and pent-up demand is spurring a rebound for the sector, according to the WSJ.

Occupancy rates were back up to 85.1% in the 31 largest U.S. markets in the latter half of 2023, according to National Investment Center for Seniors Housing & Care data. That is still 2 percentage points below the first quarter of 2020, but rent increases look promising and are outpacing inflation, the WSJ reported.

Independent living units cost an average initial monthly rate of $4,126 in December, while more intensive assisted-living units cost an average of $6,422 monthly, according to NIC data. Rents were up 6% to 6.7% year-over-year, according to a Marcus & Millichap report from November. 

“People put off moving in for an extended period of time during the pandemic,” Lisa McCracken, NIC’s head of research, told the WSJ. “Now those needs have been amplified because of that delay.”

There are about 73 million baby boomers, the youngest of whom will reach age 65 by 2030. Those 65 and older will make up 21% of the U.S. population by 2030, a significant increase over 15% in 2016, according to the U.S. Census Bureau

A glut created by overbuilding before the pandemic has been mostly absorbed as development has slowed, the WSJ reported. NIC data shows only 10,000 new units were delivered last year, the lowest number in a decade. Green Street data shows the “sector is on the cusp of a significant demand versus supply imbalance.”

Yet many seniors are determined to stay out of senior living, according to a 2022 University of Michigan poll that showed 88% of adults 50 to 80 years old want to remain in their own homes as long as possible. Aging in place has become less expensive and less isolating due to improvements in healthcare and new technology as well as more relatives having flexible work schedules, the WSJ article states.

Senior housing owners also face headwinds from staff shortages, high interest rates decreasing their buildings’ values, greater borrowing costs and seniors being unable to afford private pay communities, the article states. 

The supply imbalance remains attractive to investors, though. Ventas plans to spend $300M on acquisitions in the first half of this year, the WSJ reported, noting that the nation's largest senior housing owner plans to take advantage of other owners’ debt maturities. 

Real estate investment trusts are investing in healthcare facilities as well, hoping to align the timing with baby boomers’ need for senior housing, outpatient care and healthcare assistance. REITs acquired almost $2B in the healthcare sector in the last quarter of 2023.