Boomers Turn 80: Why Your Grandma Can’t Find an Apartment - A Deep Dive - Senior Housing Investors

Episode Transcript
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Artificial Intelligence (00:19):
First, demand is incredibly strong and
it's still growing.
That's driven mostly bydemographics, the aging
population.
It's fundamental Strong demand.
Second supply isn't keeping up.
New construction is way down,historically low starts.
That's pushing occupancy rateshigh.
Lagging supply high occupancy, Got it.
And third rates.
While the annual trend might benormalizing around 4% increases

(00:40):
, the Q1 data shows substantialyear-over-year growth is still
happening right now in many,many segments, so the pressure
is still on.

John Hauber (00:53):
Welcome to the Senior Housing Investors Podcast
.
If you are an owner operator,investor, developer or buyer of
senior housing, you've come tothe right place.
The best way to stay connectedwith us is to sign up for our
weekly newsletter athavenseniorinvestmentscom.
This podcast doesn't existwithout you, our community.

(01:15):
Thank you for listening andreach out to us anytime.

Artificial Intelligence 2 (01:23):
Okay, so you're here because, well,
you, you get your head aroundthe senior housing market in
2025.
Yeah, and probably prettyquickly.
We get that.

Yeah.

And that's really what this deep
dive is for just pulling out theabsolute must-know insights
from the latest reports andtrend analyses out there.

Exactly .
We've been digging into acouple of really key sources for
you.
First there's the Living PathMarket Intelligence Report.
That one gives us a reallygranular look at rates,
specifically from Q1 this year,and then, alongside that, we've
got a really insightful blogpost from NICAP.
It lays out the big picturetrends shaping senior housing

(01:59):
right now.

Right .
So the mission today, basically, is understanding the core
dynamics.
Yeah, you know what's drivingdemand, what's the deal with
supply and where are pricesactually heading.
Let's jump in, okay, let'sunpack it, and I think we have
to start with something thatjust well, it jumps right out of
the data.
Yeah, the sheer level of demand.

Artificial Intellige (02:18):
Absolutely .
I mean, all the signs arepointing to demand being at an
all-time high.
It's quite remarkable, yeah,the NICMA analysis.
It shows that annual absorptionrates that's basically how fast
vacant units are getting filled.
They've been over 35,000 unitsfor the last three years running
.

Wow, 35,000 a year.

Yeah, and just to give you some
context, if you look back at2015 to 2019, that period we
were seeing under 20,000 unitsabsorbed each year, so it's a
huge step up.

That's a massive difference.
And you're saying this isn'tjust like a one-year blip.

No, no.
For three years straight now,the number of units getting
occupied has actually outpacedthe new inventory being added.
Okay, and the result?
Well, it's exactly what you'dexpect Occupancy rates have
climbed significantly.
It really feels like the sectorhasn't just bounced back.
It's kind of thriving.

So NICMP actually calls this the
pandemic rebound.

Yeah.

Like fully complete.

That's the term they use.
Yeah, it suggests, you know,real confidence returning yeah,
both for the companies runningthese places and, really
importantly, for the residentsthemselves.
This level of demand it signalsa real shift, I think, in the
market's fundamentals Shows itsresilience too.

So OK , what's the engine behind this?
It can't just be catching upfrom the pandemic years, can it?

You're spot on.
I mean, the rebound wasdefinitely part of it
Kickstarted things again, butthe main driver, the one that
keeps going, is demographics.
Simple as that.
The aging population, exactlythe rapid growth in the number
of seniors, especially the babyboomers.
You know, born 46 to 64, thevery first boomers.
They're turning 80 this year,2025.

Right , that's a key milestone age,
isn't it?

It is and it suggests this high demand
isn't just here to stay.
It's probably going tointensify.

That paints a pretty clear picture.
A huge wave of people enteringthat age range, where senior
housing becomes a much morecommon consideration.

And the numbers really back it up.
Yeah yeah.
Nicmap data shows occupiedunits in the main markets.
Primary and secondary climbedover 950,000 by the end of last
year 950,000.

Wow.

Yeah, compare that to like 876,000
back in early 2020.
It's a big jump.

And occupancy rates themselves.

They reflect that Hit 87.7% end of
last year, up from 85.6% theyear before.
And if you look at what theycall stabilized properties the
more mature communities they'reeven higher 88.8%.
There's a real chance the wholeindustry could break 90%
occupancy by the end of thisyear 90%.

that's pretty tight Right.
So, ok, massive demand,occupancy climbing, you'd think
construction would be booming tomeet it right.

Artificial Intelligen (04:53):
Logically , yes, but this is where the
story gets well interesting, ormaybe concerning, depending on
your perspective.
Wow.
So, Despite this incrediblystrong demand, construction
activity is way down.
It's lagging significantly.
Really, yeah, and I see MAPpoints out Back in 2019, we were
seeing about 70,000 units underconstruction peak levels 70,000

(05:15):
, okay.
Today, that number's plummetedto just over 31,000.

Wow, less than half.

Yeah, it's a dramatic drop.

And that's just what's currently
being built.
It's a dramatic drop, andthat's just what's currently
being built.
What about new projectsstarting up?
The?

Artificial Intelligenc (05:24):
pipeline .
That's maybe even more telling.
The number of new constructionstarts last year, 2024.
Fewer than 10,000 units inthose main markets 10,000.

That sounds low.

It is.
It's down almost 40% from theyear before and it's the lowest
number of starts we've seensince get this 2009.

Goodness .
So why?
Why the slowdown when thedemand is so obvious?

Well, it's a few things tangled
together.
Costs are up, constructioncosts, materials, labor
shortages are still a real issueand getting financing the
lending environment it's justtighter, more cautious for these
kinds of development projectsright now.

So in the short term I guess that
helps existing places fill up.

Exactly and I see you may point that
out.
It boosts occupancy for currentoperators, gives them more
pricing power.
They can raise rates Right.
But the long term worry is thisreally tight pipeline of new
inventory?
It could create bigger problemsdown the road, accessibility
issues maybe.

Okay, so less new supply.
Higher occupancy leads us torates.
We've seen some pretty wildswings there in recent years.

Well, the good news, according to
NICMAP anyway, is that theannual rate increases seem to be
stabilizing kind of finding anew normal.

OK, what does that look like?

So for 2024,.
If you look year over year,rent growth for majority
independent living propertieswas around 4 percent 4 percent
OK.
And majority says the livingwas pretty similar about 4.3
percent.
It's much more sort ofconsistent than the real zigzag
we saw during the pandemic andwith all that inflation
afterwards.

That must be a relief for everyone
Operators, residents,predictability helps.

Hugely For operators.
Yeah, it makes financialplanning easier, allows for
investment For residents whilerates are still going up.
It's maybe a bit more moderatethan some of the really sharp
hikes we saw.
Helps with budgeting,affordability concerns and the
general feeling seems to be thatthis trend maybe around that 4%
annual increase mark is likelyto stick around through 2025.

Okay, so that's the big picture on
rates from NICMP, but youmentioned, the Living Path
Report has much more detail forQ1 2025.

Exactly .
This is where we can reallyzoom in.
Living Path breaks it down byindependent living, assisted
living and memory care.
Gives us average rates, averagesquare footage, price per
square foot and, crucially,those recent changes year over
year and quarter over quarter.

All right, let's dive into that data
.
Then let's start withindependent living.
What are we seeing there for Q1?

Okay, independent living For a studio.
The average rate was $3,684.
Average size about 416 squarefeet.
That works out to $8.85 persquare foot.
This is based on data from 618properties.

And the change.
How does that compare?

That's where it gets interesting.
Compared to Q1 last year, up8.5 percent.

Eight and a half percent.
Wow, it's quite a bit higherthan the 4% normalization trend.

It is, and even quarter over quarter
from Q4 last year it was up 5.1%, so still strong increases
there.

Okay, what about bigger units, one
bedrooms?

One bedroom average rate $4,326.
Bit bigger 626 square feet onaverage.
So the price per square foot islower $6.91.
This is from over a thousandproperties and the increase Very
similar Year over year up 8.4%.
Quarter over quarter up 5.3%.

And two bedrooms.

Two bedroom average rate $5,541.
Average size 950 square feet,so $5.83 per square foot.
Data from almost a thousandproperties.
Here the increases were alittle lower but still
significant 6.6% yearoverover-year and 4.5%
quarter-over-quarter.

So across the board in independent
living, q1 saw really strongyear-over-year growth, well
above that 4% mark.

Definitely .
That's the clear takeaway there.

Okay, let's move to assisted living.
That's often a segment peoplewatch very closely.
What are the base rates lookinglike?

Assisted living.
Base rates A shared unitaveraged $4,095.
Smaller space 355 square feet.
So the price per square foot ishigher $11.55.
Based on 330 properties.

Increases .

Year over year up 7.1%.
Quarter over quarter 3.5%.
Still strong.

It's okay.
Studio.

Studio base averaged $4,893.
Similar size, 359 square feet,but the price per square foot
jumps to $13.62.
This is from a much largersample, over 1,600 properties,
and the growth Year over year up7.8%.
Again pretty robust.
One bedroom based Average$5,993.

(09:56):
Larger 526 square feet $11.39per square foot.

Over 1,500 properties here year over
year up 7.4%, quarter overquarter, 4.7%.

You see the pattern Very consistent and
the two-bedroom base About$7,469, quite a bigger 824
square feet, $9.06 per squarefoot, over 1,100 properties.
Increases were 7.5% year overyear and 4 and 4.6%
quarter-over-quarter.

And assisted living also has care
costs on top of the base.
Rent right, that's right.

The Living Path Report puts the
average extra cost for care plusmeditations in assisted living
at $1,808 for Q1.

Okay.
So again, like in independentliving, we're seeing strong,
pretty consistent year-over-yeargrowth across all the base unit
types in assisted living, wellabove that 4% trend line.

Absolutely .
The Q1 data shows significantupward pressure continued.

All right.
How does memory care compare?
Obviously more specialized care, different environment.

Yeah, memory care.
A companion base unit, soshared, averaged $5,993.
Decent size 399 square feetworks out to $15.01 per square
foot from over 1,100 properties.

Increases there.

A bit lower than ALL, but still solid.

Okay, and private rooms.

Private base units average $7,464.
Interestingly, the averagesquare footage is smaller, 330
square feet Smaller, but privateRight, which means the price
per square foot is way higher$22.64.
That's based on over 1,500properties $22.64 per square
foot.

Yeah, and the increases.

Quarter over quarter 4.3% Backup in line with the AL growth
rates.
And the extra care costs inmemory care.
Higher than AL, I assumeSignificantly higher?
Yeah, average care plus medscost in memory care was $2,519
in Q1.

Okay, so that price per square foot
for private memory care, thatreally jumps out.

It really does Shows the premium
for that private space combinedwith the very specialized care
and staffing needed.

Now the report also breaks down the
care costs themselves rightwithin AL and MC different
levels.

Yes, it does.
Provides quite a bit of detailthere.
For assisted living, level one,care averaged $727.
Level two was $1,272.
Level three, $1,818.
And level four hit $3,254.

And how much did those care charges
increase?

The year-over-year increases were
actually pretty consistentacross those levels, hovering
right around 5.9%.
Quarter-over-quarter was about2.8% on average.

Artificial Intellig (12:14):
Interesting and memory care levels.

Similar story Level 1, care, averaged
$1,393.
Level 2, $1,835.
Level 3, $2,533.
And level 4, $3,926.
Again, pretty consistent growth.
Year over year averaged around5.8%.
Quarter over quarter around2.7%.

So the percentage increase for the
care component seems fairlysteady across the different
levels of need within eachcategory.

Yeah, that uniformity is quite
interesting.
It wasn't like level four costsshot up way faster than level
one, for instance.

And quickly.
What about other clinical costslike medication management?

Sure For ALMed management.
The average was $536.
That was up 5.0% year over year, 2.3% quarter over quarter.
So again, steady, moderategrowth there too.

Okay.
So pulling this all together,looking at this very detailed
living path rate data for Q1,alongside those broader NICMA
trends, it really feels likethat strong demand we talked
about earlier is.
Well, it's clearly fuelingthese rate increases, isn't it?

Absolutely .
That's the direct connection.

And the lack of new supply just
pours gasoline on the fire.
Presumably.

It seems that way You've got high
occupancy because demand isstrong and construction is slow.
That gives operators theleverage, the ability really to
implement these increases.
And while NICMAP's broader viewsuggests things might be
normalizing annually around that4% mark, this living path data
for the first quarter shows thatin many specific segments the

(13:44):
year-over-year growth was stillrunning considerably hotter than
that 6%, 7%, 8%.

So maybe that normalization is
still kind of working its waythrough the system, or maybe
some markets are just muchtighter than the average.

Could be either or both.
It suggests that, while theoverall trend might be towards
stabilization, there's stillsignificant upward pressure in
many areas right now.

OK, so as we wrap up this deep dive,
what are the absolute keythings you think people
listening should take away aboutthe senior housing market as we
look towards the rest of 2025?

OK, three main things I think.
First, demand is incrediblystrong and it's still growing.
That's driven mostly bydemographics, the aging
population.
It's fundamental Strong demand.
Second, supply isn't keeping up.
New construction is way down,historically low starts.
That's pushing occupancy rateshigh.
Lagging supply high occupancy, Got it.
And third rates.
While the annual trend might benormalizing around 4% increases

(14:38):
, the Q1 data shows substantialyear over year growth is still
happening right now in many,many segments, so the pressure
is still on.

So the real aha moments for me
listening to this are just thescale of that demand those
absorption numbers are huge andthe depth of the supply problem.
I mean construction starts lowsince 2009.
That's stark.
It really is, and the fact thateven with talk of normalization
, actual prices at least in Q1,we're still climbing pretty
steeply in a lot of areas.

Exactly those are the core dynamics
right now.

Which leads to, I guess, a final
thought, maybe something for you, the listener to two, on yeah,
definitely.

Given these powerful forces huge
demand, tight supply what doesthat mean long term, you know,
for the quality of housing andcare for accessibility?
Can everyone who needs itactually get it?

And maybe what kind of innovation is
needed, what solutions mighthelp fix this growing imbalance
between who needs housing andwhat's actually available.

That's the big question, isn't it?

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Boomers Turn 80: Why Your Grandma Can’t Find an Apartment - A Deep Dive

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