03/27/2023
I see articles about senior housing virtually every day, from a variety of sources. This caught my eye from the Wall Street Journal.
"This affordable senior housing project is aimed at the middle class"
Industry keeps watch on development to see whether cost-saving efforts are exportable.
• BY PETER GRANT,
• THE WALL STREET JOURNAL
• – 03/07/2023
Construction workers in the Boston area broke ground Monday on one of the rare senior housing projects that is intended to be affordable for middle-class residents.
The developer 2Life Communities plans to charge monthly rents as low as $1,800 at the $100 million development in Newton, Mass. Comparable independent living communities in the Boston region charge $4,200 a month, according to the National Investment Center for Seniors Housing & Care, or NIC, an industry organization.
2Life said it can achieve a lower price point by breaking from the traditional senior facility model, with policies such as serving group dinners only three nights a week and requiring residents to volunteer 10 hours a month.
The entrance fee starts at $395,000, which is about one-third the entrance cost at other senior housing facilities, 2Life said. When a resident leaves or dies, 80% of the fee will be refunded to them or family members.
Nearly all of the project’s 174 units have been reserved with deposits, said Amy Schectman, 2Life’s chief executive. Many seniors who didn’t commit, she added, “are very disappointed right now.”
2Life is a nonprofit organization whose current portfolio consists of subsidized housing. The Newton project will take more than a decade to give 2Life a return on the more than $20 million in equity it is contributing, which means this approach may not work for for-profit developers.
Still, the senior housing industry is closely watching the project to see whether some of its money-saving efforts are exportable. For example, some senior housing operators are exploring the use of volunteer work from residents to keep costs down.
The average cost of private senior housing in the U.S. for people who don’t need specialized care increased 5.2% in 2022 to a record $3,811 a month, according to NIC, the largest single-year increase since the organization started tracking the statistic in 2005.
A 2019 study by NIC and the University of Chicago projected that by 2029 there will be 14.4 million middle-income seniors ages 75 and older in the U.S., and about half will be unable to afford private-pay senior housing, according to the study that was named “The Forgotten Middle.”
In the years leading up to the pandemic, developers were cranking up supply in anticipation of soaring demand from baby boomers but most of these projects targeted affluent populations.
The high costs of development, labor, meal services, transportation and programming also have made it very difficult to cut rents at the 1.8 million senior housing units in the U.S. that provide a range of care from just meals and programming to skilled nursing and memory care.
“I don’t think anyone has figured out the secret code,” said Beth Mace, NIC’s chief economist.
More developers are now giving it a try. In 2021, Atria Senior Living, one of the country’s largest senior housing operators, launched a business offering less expensive rents than its other brands. The rollout followed its acquisition of the Holiday Retirement management services business, with more than 220 communities.
That same year, Seattle-based Merrill Gardens launched an affordable brand named Truewood at 28 properties, many of which were part of a 28-property portfolio it acquired for $385 million. The company’s Seattle-area Truewood community, which serves three meals, seven days a week, rents studios for an average of $2,240 a month and one-bedroom units for $3,280 a month.
Executives at Atria and Merrill Gardens say they are keeping food costs down by offering fewer meal selections, rather than extensive menus three times a day.
“We’re doing everything we can to keep rent as low as we can,” at Truewood, said Tana Gall, president of Merrill Gardens.
More seniors have been hoping to age at home, taking advantage of companies such as Amazon.com (AMZN) and Uber (UBER) and technology that enables them to stay in touch with healthcare providers. Still, with the population aging, more seniors are experiencing mobility limitations, loneliness or other problems that are addressed by senior housing.
Efforts to offer affordable housing have been especially tricky since the pandemic because senior housing initially was crushed by soaring costs and a nosedive in occupancy. “It’s very difficult to execute on a future vision when you’re still recovering from everything in the pandemic,” said John Moore, Atria’s chief executive.
However, conditions for operators and landlords have improved over the past year. The pace of new construction has slowed while occupancy has rebounded to just about 4 percentage points below where it was during the pandemic, according to John Pawlowski, an analyst at real estate analytics firm Green Street.
“The next five years look very good in terms of the demand versus supply balance,” he said.
Some developers, such as Merrill Gardens, are expanding their affordable brands by purchasing and repurposing older senior housing complexes that lack amenities affluent seniors expect, such as a washer and dryer in every unit.
At Truewood communities, “We’re making the laundry room a cool place to hang out,” Ms. Gall said."
