By Richard Lynn
The United States is undergoing an unprecedented demographic shift as 10,000 baby boomers reach retirement age each day. As a result, senior housing will become more of a necessity than it already is, and in particular, affordable housing options for middle-income seniors will be vital; a recent study on the “forgotten middle” predicts that by 2029, 54 percent of seniors will not have the financial means to pay for their combined housing and health costs. There is a significant opportunity for investors and developers to address this need and drive growth in the senior housing market. But in order to ensure high-quality, truly affordable options, private companies and government must work together to incentivize the type of development that will satisfy the housing needs of middle-income seniors.
The landscape
Today, affordable housing communities targeted at seniors that offer health services like onsite medical care and fitness activities are becoming more common, and studies show they help to reduce health care costs and the need for expensive trips to the emergency room. Despite the success of these programs, limited funding is available to make them accessible to middle-income seniors.
At the same time, the number of middle-income seniors is projected to almost double from 7.9 million in 2014 to 14.4 million by 2029. Seniors on fixed incomes who do not qualify for Medicaid or other services targeted at people at the lowest end of the income spectrum are forced to pay exorbitant costs for assisted living or private caregivers. As this population continues to skyrocket, the problem will become even more pronounced.
The opportunity to invest
This is not rocket science: As the number of seniors grows, so too will the demand for senior housing options. This challenge presents an incredible opportunity for private investors and senior housing operators to direct innovation and funding toward developing vital services and creating homes for a significant portion of the senior population. To do that, the industry needs more financing vehicles directed specifically at senior housing.
Recently, I worked with a client to facilitate the sale of a parcel of land designated for senior housing. The apartments were built and included both affordable and market-rate units. All amenities were in place—clubhouse, theater and more—and the director of a camp for children across the road was already planning intergenerational activities that would involve the new senior residents. All we needed were the seniors to move in. But in the end, the development did not qualify for the 9 percent Low-Income Housing Tax Credit, and we missed out on the opportunity to provide high-quality affordable rentals to seniors in an area that badly needed it. There is a demonstrated need for more flexibility in financing senior housing.
The way forward
Just as the Low-Income Housing Tax Credit serves as the primary vehicle for financing affordable housing today, there should be an incentive for private companies to invest in and build affordable housing geared toward middle-income seniors.
The need for affordable housing options for middle-income seniors will only continue to grow, and so will the investment opportunities and potential clients that go along with it. Investors should be looking for opportunities to get involved, and government must create incentives to stimulate private sector innovation in this area to ensure that as a society we give every senior the opportunity to access and afford housing and services that support them in their retirement years.
By: Richard Lynn (NREI)
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