Keeping senior living affordable may increasingly become a challenge for both industry stakeholders and policymakers. As the aging population rapidly increases, particularly with the first Baby Boomers set to turn 80 in 2025, the demand for senior housing is expected to surge. However, affordability challenges threaten to limit access to quality care for many older Americans.
Argentum, in a comment letter to Senator Ed Markey regarding the Health Over Wealth Act (HOWA), highlighted the pressing need for investment to ensure that senior living remains accessible and affordable. Paired with insights from the Argentum Value of Assisted Living white paper and the NIC MAP Vision June 2024 Senior Housing Market Outlook report, it is evident that the industry must address the affordability gap while preparing for the upcoming demographic wave.
The Affordability Challenge
The Health Over Wealth Act, as proposed, seeks to provide greater transparency of private equity ownership of health care entities, primarily hospitals and nursing homes. Argentum worked closely with lawmakers to stress the nuances of private investment in assisted living, and successfully advocated for assisted living to be removed from the bill. Argentum and other stakeholders promoted the need to attract investment to expand the availability of senior living communities. The primary concern is ensuring that senior living remains both accessible and affordable without compromising the quality of care or the long-term viability of the industry.
In formal comments to Senator Markey, Argentum reiterated that senior living providers are facing significant operational cost increases and that without continued investment, senior living could become out of reach for many middle-income seniors.
A Supply-Demand Imbalance
The NIC MAP Vision June 2024 report outlines the broader industry dynamics that are exacerbating the affordability issue. The senior housing sector is facing an unprecedented supply-demand imbalance as the population of older adults continues to grow, while the pace of new housing development lags behind. As the report notes, demand growth is expected to outstrip supply growth well into the 2030s, leading to a projected $275 billion supply gap by 2030 (NIC MAP Vision June 2024). This mismatch between demand and supply is already leading to increasing occupancy rates, which, while beneficial for operators, raises concerns about the potential for rent increases that could further strain affordability for seniors.
The report highlights that construction starts in senior housing have fallen to near historical lows due to high interest rates and limited capital availability. This slowdown in development comes at a time when the aging wave will demand nearly double the historical maximum development pace just to maintain a 90% occupancy rate by 2030. These trends point to the need for urgent investment and innovative solutions to expand senior housing capacity without pricing out middle-income seniors.
Bridging the Investment Gap
Argentum’s formal comments on the private equity legislation underscore the need for public-private partnerships to prioritize policies that incentivize investment in senior living infrastructure. These policies could include tax credits for new senior housing developments, grants for affordable senior housing projects, and greater access to low-interest loans for developers and operators. The NIC MAP Vision report supports this view, noting that the senior housing industry will require more than $1 trillion in new inventory by 2041 to meet the housing needs of the aging population. Without this level of investment, the affordability crisis will only worsen as supply falls further behind demand.
Additionally, Argentum advocates for more creative financing options to support middle-income seniors, who often fall into the gap between Medicaid eligibility and the ability to afford private pay senior living. This includes exploring insurance products, such as long-term care insurance, that could help cover the cost of senior living and expanding programs like PACE (Program of All-Inclusive Care for the Elderly) to provide more comprehensive care options at lower costs.
Moving Forward
The affordability of senior living is not just a financial issue—it’s a societal challenge that requires a multifaceted approach. As Argentum’s comment letter to Senator Markey and the NIC MAP Vision report both demonstrate, the industry is at a critical juncture. To ensure that senior living remains accessible for the growing number of older Americans, it is essential to attract new investment, encourage development, and create policy solutions that address the financial realities of aging. By focusing on these priorities, we can work toward a future where every senior has access to affordable, high-quality care.
