I stumbled into the senior housing industry soon after finishing college There were many things I did not understand, though I thought I did. I was not alone because the industry was very young. Over the years, the industry has gotten much more sophisticated and profitable. The current generation of independent living, assisted living and CCRC communities look more like luxury hotels or full service resorts. This evolution is natural, it is what people want and is profitable. Now add to this the rapidly aging Boomer population and investing in senior housing seems like a sure bet. You can find hundreds of articles that support this proposition with fantastic statistics, charts and graphs.
I am not so sure . . .
The typical assisted living community has starting rates that hover around $4,500 per month and in many cases additional services can add hundreds or thousands of dollars a month. Independent living is slightly less expensive and high quality private pay skilled nursing and memory care can easily approach or surpass $10,000 per month. There are lots of options for people who have buckets of money. Here is the problem. Boomers have always been better at consuming than saving. Even those who saved have found that their mutual funds and home values have tanked. As a result there is a huge gap in the senior housing marketplace for people with modest incomes and modest resources. These are people who will receive the maximum social security payment and may have an additional few hundred dollars per month in supplemental income from 401k’s and pension plans. These are people who will not have the financial capacity to pay $4,500 plus per month.
This problem is compounded by the growing and persistent unemployment and underemployment problem that impacts the retiring Boomer’s children. Even though the selfish generation, they care about their families, their children and grandchildren. This subset of the Boomer generation appears to be senior housing’s “emperor with no clothes” and the question becomes how will these individuals address their housing and care needs? I believe:
• They will stay in their homes either rented or owned. They will take advantage of Medicare and Medicaid funded home care service.
• They will move in with their children which will create meaningful work for otherwise unemployed younger family members and preserve capital for the next generation.
• They will work with attorneys and families to divest themselves of assets and move into Section 8 senior housing.
• As consumers who have lost the resources to consume, they will get angry and depressed.
• They will not flock to senior housing because they will not have the buying power.
This will leave senior housing providers will scratch their heads, wondering where the Boomers are; wondering why their communities are not filling up. Like so much of life, this gap in senior housing can either been seen as a dire problem or burgeoning opportunity. To me, this group represents a huge virtually untapped opportunity. Next week I will offer some suggestions on how to tap into this gap. PART 2 IS NOW AVAILABLE HERE
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