Industry Metrics for the Seniors Housing & Care Property Market
- What are the property market supply trends?
- What are the property market demand trends, including the resident demographics?
- How is occupancy tracked, and what are the property market occupancy trends?
- What are the revenue models, payer types, and payment risk?
- What are the revenue trends for NOI, rents, and expenses?
What are the property market supply trends?
Seniors housing and care supply trends vary by property type. Prior to the COVID-19 pandemic, construction was generally slowing for majority assisted living properties slowing after a period of heightened levels of construction and strong inventory growth and remained generally strong for majority independent living relative to historical trends. Although there have been recent quarters with high levels of absorption, inventory has generally been coming online faster than the rate of absorption. COVID-19 also had notable impacts on both seniors housing and skilled nursing occupancy. There is uncertainty as to how the COVID-19 pandemic will impact continue to impact supply-demand trends in the future, but it pushed demand significantly lower through mid-year 2020, at least. For timely updates regarding supply-demand trends and the current state of the seniors housing market, please review the NIC Notes blog. In light of the pandemic, we have also started reporting some rolling three-month metrics on an intra-quarterly basis. For access to the Intra-Quarterly Snapshot containing some of that data and additional data relating to the impact of COVID-19, please visit the NIC COVID-19 Resource Center.
What are the property market demand trends, including the resident demographics?
There are several factors supporting demand for seniors housing and care including social interaction, culture, hospitality, care and support, and fewer responsibilities for chores. Demand is also expected to increase as the baby boomers age. As of 2019, approximately 6.8% of the US population, or roughly 22.6 million individuals, were aged 75 years or older. By 2025 the population over 75 will grow to 28.6 million and by 2030 grow to 34.5 million.
The recent emphasis on healthy, active lifestyles has led to some seniors living longer. This lifestyle can increase the length of time a resident stays in a seniors housing community and shapes expectations of what senior living should be like.
Another important consideration in demographics is seniors’ adult children, who often participate in decision-making on behalf of their parents. Their financial resources, well-being, and geographic residence location should be considered.
A more in-depth discussion of demand factors and trends can be found in the NIC Investment Guide, Fifth Edition,, Looking into the Future: How Much Seniors Housing Will Be Needed?, and the NIC Notes Blog.
NIC also funded an in-depth demand study conducted by NORC at the University of Chicago focused on the middle market for seniors housing. This study was the first of its kind and defined American’s large middle-income seniors’ cohort– not only by its demographic characteristics but its housing and healthcare needs— today and in 2029. More information on the details of the Middle Market study can be found here.
How is occupancy tracked, and what are the property market occupancy trends?
Per the NIC MAP® Data Service definitions, majority independent living, majority assisted living, and majority nursing care, occupancy is calculated as the sum of occupied units divided by the total inventory. By care segment, independent living, assisted living, and memory care are counted by units and nursing care is counted by beds. Since occupancy trends for seniors housing and care properties change over time, investors should seek out the most recent information available, such as that available through the NIC MAP Data & Analysis Service. While the COVID-19 pandemic has created disruptions throughout the world and has created changes in seniors housing and care occupancy rates, NIC is committed to releasing timely data capturing occupancy trends. In 2020, NIC began releasing select metrics as part of our intra-quarterly data releases. Our Intra-Quarterly Snapshot report contains select rolling three-month metrics and is available to the public in our COVID-19 Resource Center.
Starting in June 2020, NIC began releasing monthly data from our Skilled Nursing Data Initiative. The occupancy rate tracked in this Initiative is the day occupancy rate, as calculated by counting the total number of beds, multiplied by how many days each bed was available, and dividing by how many patient days were used. For example, a property might have 10 beds, there are 30 days in this month, so a total of 300 “bed days” available. The property had patients in beds for 240 of those available “bed days,” equivalent to 80% occupancy. Day occupancy is used in skilled nursing facilities because occupants move in and out of facilities much more often than in seniors housing. If you are interested in our monthly data from our Skilled Nursing Data Initiative, please see the NIC Notes Blog.
What are the revenue models, payer types, and payment risk?
The core revenue models for private pay seniors housing are rental and entrance fee with monthly service fees. There are also some examples of condominium communities with service fees and homeowner association fees. In the latter case, the resident owns the real estate. In the entrance fee community, residents receive a right to occupy without direct ownership. For nursing care, it is based on a payment reimbursement model from public or private sources.
The primary payment types for private pay seniors housing are private pay, Medicaid waiver (essentially a program for reimbursement of assisted living charges that is not supported in all states), and privately purchased long term care insurance. Other forms of support include veterans’ benefits, which support some forms of assisted living services, or state housing finance programs stipulating low/moderate income rental programs, which support the real estate needs but not the care needs. For nursing care, most of the revenue is from government payment sources, i.e. Medicaid and Medicare, although much of the Medicare payment system is moving to managed Medicare which is likely to grow as a percentage of revenue for nursing care properties.
Payment risk in the case of private pay seniors housing could surface in a couple of different forms. The most common form is depletion of assets and inability to remain current on payments. In the case of entrance fee communities, the risk from a resident standpoint is that entrance fees are not typically secured and thereby potentially exposing the reimbursement of entrance fees at a contracted level upon death or when vacating the unit to credit loss as an unsecured creditor to the project. In the case of condo projects, the resident has the risk/burden of resale, which is similar to entrance fees, but where they have to carry the real estate until resale. Medicaid and veterans’ benefits carry the risk of inadequate reimbursement for the level of services required and, in some states, limit the operator’s ability to discharge residents due to the level of care needs. In the case of nursing care, there is risk from the public government sources that reimbursement dollars could be reduced (“stroke of the pen” risk). The risk of reimbursement reduction is also relevant for dollars paid from managed Medicare/Medicaid insurance companies.
What are the revenue trends for NOI, rents, and expenses?
Rental rates (and revenues) for seniors housing and care properties historically have increased on average by 2% to 4% on an annual basis over the last several decades, with certain geographical regions seeing higher or lower gains due to local market factors. More recently however, rental rates have seen only modest increases due to downward pressure from greater competition.
Since rental rate trends for senior housing and care properties can change quickly, investors should seek out the most recent information available, such as that available through the NIC MAP Data Service.
Expenses traditionally have seen annual increases comparable to those in revenues, with operating margins therefore remaining fairly constant. Since around 2012 wages have been increasing for assisted living employees. The NIC MAP Data Service offers a BLS Employment and Wage Report as a product in the NIC MAP portal. The BLS Employment and Wage Report is designed to help our clients assess and benchmark local labor pools and wage rates. The reports provide metropolitan area, state and national level employment and wage data for occupational job categories associated with the seniors housing and care sector. They provide data that will give operators, developers, and capital providers the ability to benchmark occupation-specific wage rates being used in business plans and pro forma models against national and state-level figures. They also offer users the means to compare metropolitan area wage rates within states for relevant occupations. Among the benefits of this new report are simplifying the task of acquiring and downloading data from the Bureau of Labor Statistics (BLS) into property level P&L statements and modeling specific wage rates for each of the labor groupings within an organization.
In late 2016 NIC MAP also launched its Actual Rates product. The NIC Actual Rates Initiative is driven by the need to increase transparency in the seniors housing sector and achieve greater parity to data that is available in other real estate property types. Providing accurate data on the monthly rates that seniors housing residents are actually paying compared to properties’ asking rates helps the sector achieve this goal. As of July 2020, Actual Rate data is available to NIC] MAP clients at the national level aggregated by majority property type. Actual rates are also available by care segment type at the national level and three additional metros. NIC is prioritizing the roll-out of the reported metropolitan markets for the Actual Rates data based on the participation rates of local seniors housing operators. Learn more about our Actual Rates Initiative here.