Senior Living News Wire

With the recession dragging on, the senior housing market has experienced a significant slump. New construction starts have dropped by 53% since the 2008 crash, and now make up just over 1% annually of the senior housing inventory, according to the National Investment Center for the Seniors Housing & Care Industry (NIC).

At the same time, however, demand for such housing is expected to increase radically over the next few years as baby boomers reach retirement age.

The Boomers are Coming

“We have started to see that demand for retirement and assisted-living housing [is] now outstripping supply,” said Sampada D’silva, senior vice president of underwriting/acquisitions with Cambridge Realty Capital Companies.

n the second quarter of 2011, the NIC reports that the annual inventory growth for seniors housing was 1.1%, down from 1.3% in the first quarter of 2011 and 2.1% in the second quarter of 2010. According to the NIC, this is the lowest level seen in the current market cycle.

Occupancy rates dropped during the recession, standing at about 88% currently. NIC researchers expect those rates to soon begin inching up, putting pressure on a marketplace that just isn’t creating enough new housing.

“More and more of the unoccupied units will be filled,” said Chuck Harry, director of research and analysis with the NIC. “There will be an increase in the level of demand.”

Finding the Funds

This dilemma is due in part to the difficulty builders and developers have had in securing financing for planned or ongoing projects.

“Many developers and builders had projects in the pipeline that have not been started because of the economic downturn,” explained Bill Kauffman, a senior research analyst with the NIC.

For senior housing construction projects to succeed, they need a combination of solid financing and good business planning, and the fact is, not all projects meet these criteria.

“Not every senior housing project can succeed in today’s economy,” said D’silva. “Successful senior housing projects require a combination of strong balance sheets and extensive operating experience. Most of the developers are small- to mid-size regional experienced owner/operators who are familiar with their local markets and have a track record of successfully operating the facilities.”

Cutbacks in federal subsidies for housing through the Department Housing and Urban Development’s programs combined with a difficult market have created a perfect storm in which housing for seniors has suffered.

“Regional banks, who have been the traditional source of construction financing for the senior housing industry, aren’t lending to the level that they were prior to the credit crisis,” explained D’silva. “HUD 232 health care loans remain popular, but the agency has been swamped with orders. The senior housing industry may have a supply problem in the coming years unless the credit markets thaw and new construction commences.”

Some analysts say the biggest concern in the senior housing market is the lack of affordable options for seniors with limited incomes.

“There is certainly not enough senior housing for lower income seniors,” said Sloan Bentley, president of Seniority, Inc., a retirement community management company. “I believe in the value of senior housing, and I’m concerned about this problem. It’s going to be very challenging. People with lower incomes are going to need places to live.”

Less than 40% of older Americans with moderate to severe disabilities reside in a nursing home, with most choosing to receive care in their homes or communities, says new data analyzed by Avalere Health LLC for The SCAN Foundation.

In 2006, only 38% of older Americans with disabilities chose to receive care in nursing homes, while a majority 58% chose either staying at home or alternatives such as assisted living facilities, domiciliary care facilities, or continuing care retirement communities.

In general, Medicare spent 25% more money per capita on those receiving community care, at $18,308, compared to $14,594 per capita for nursing home residents. The program spent $14,001 for residential care residents.

This trend toward community-based care is significant when it comes to how acute and long-term services and supports are coordinated and managed, as well as the high costs of the care this population requires, says Avalere.

Because of this shift in preferences, long term services and supports (LTSS) spending to the community has been rebalanced in many states to more accurately reflect where older disabled Americans are being cared for.

By law, states must operate programs in a way that does not unnecessarily force an individual to move into a nursing home or other institution, supported by the Supreme Court ruling in Olmstead vs. L.C. that “the unnecessary institutionalization of people with disabilities is a type of discrimination prohibited by the Americans with Disabilities Act,” says The SCAN Foundation.

In light of this, the Affordable Care Act recently included opportunities for states to receive additional funding to help individuals transition from nursing homes to community based settings.

However, Avalere data shows that community living for those with disabilities has some negative aspects.

Older Americans who receive care in a community setting are hospitalized more often than those in nursing homes, as 21% of community residents with moderate or severe disabilities had two or more hospital stays, compared to 12% of nursing home residents, data shows. This suggests, says Avalere, that those getting community care don’t have access to the same levels of care management as those in nursing homes, which may ultimately result in higher care costs to the community.

“Our analysis shows the urgency of care coordination for disabled Medicare populations—particularly those who are living at home. The fact that hospitalization rates are double for those outside institutions is important as policymakers grapple with cost control at the federal level,” said Dan Mendelson, CEO and founder of Avalere Health LLC, in a statement.

View The SCAN Foundation’s data brief here.

Written by Alyssa Gerace

The Department of Housing and Urban Development is providing $25 million to help multifamily residential properties reduce their energy consumption.

Through the new energy innovation multifamily pilot program, the goal is to develop ideas and mechanisms that could potentially be replicated nationally as well as help create industry standards in the home energy efficiency retrofit market.

“HUD is extremely excited about this pilot program because it aligns with the goals of the Administration to create green jobs and build sustainable communities,” said Acting Federal Housing Commissioner Carol Galante. “The innovations that flow from this pilot program will serve as models to create future industry standards in energy efficiency.

HUD is asking the private sector to develop new innovative approaches to create jobs and help people save energy and money.

“Since these grants will be complemented by private capital, the investors will also have a unique opportunity to become leaders in helping make affordable multifamily homes greener,” said Theodore Toon, Associate Deputy Assistant Secretary for HUD’s Office of Affordable Housing Preservation.

For more information, see the funding notice.

Written by John Yedinak

South Bay Partners, Ltd., along with its joint venture partner, Integrated Real Estate Group, have contracted to purchase land for developing a $9 million memory care community in San Antonio, Tex.

The two companies, both based in Dallas, announced their intentions to break ground in late 2011 on a 67-bed community, which will be the first of two senior living properties South Bay has slated for development in San Antonio. They are also planning a campus that will offer assisting living, memory care, and skilled nursing senior services. IREG will provide specialized construction services for both projects.

“It’s clear that there is a booming market for senior housing and healthcare in San Antonio—and across Texas—due to an aging population and the growing migration of retirees to our state,” said Craig W. Spaulding, founder of South Bay Partners, in a statement. “We see a need for communities dedicated solely to memory care—primarily for Alzheimer’s patients. This project is a response to fill that niche.”

South Bay and IREG have developed many similar senior housing and healthcare projects across Texas, including other campuses that combine independent living, assisted living, skilled nursing, and Alzheimer’s facilities.

Despite the downturn in commercial real estate, each company has made significant forays into the senior housing realm. South Bay has completed more than 60 senior housing communities nationwide, with investments of more than $560 million, and $80 million more in various stages of development. IREG has built more than 60 communities with cumulative costs of more than $1 billion, many in conjunction with South Bay.

“We see great potential for San Antonio,” said Richard E. Simmons, founder of Integrated Real Estate Group. “As demand grows, we will continue to develop more senior care properties in this market—with services designed for the needs of each area. We share a long and successful track record of accomplishment with South Bay Partners.”

Written by Alyssa Gerace

Changing demographic patterns and a rapidly aging population have “major implications” for policy and politics, says a Pew Center on the States infographic. The oldest states, which include Maine, Vermont , West Virginia and New Hampshire may be even more pressed for time when it comes to preparing for long-term care and other challenges that come with the aging baby boom.

To give some magnitude to the aging of the baby boom population, Pew produced a series of “population pyramids” to show exactly how age stacks up state by state, and which states will bear the largest aging burdens as the median age moves away from 30s and into the next decade.

With the U.S. median age just over 37 and the median age in older states such as Maine at nearly 43, the infographic shows each state by the ages and male to female ratio of its residents. The complete breakdown also includes a comparison between the U.S. and several other countries, finding that the U.S. has a high median age and defined baby boom when compared with developing nations such as Afghanistan and Mexico.

View the complete infographic.

Written by Elizabeth Ecker