Why Senior Housing Communities Fail or Underperform

Not entirely sure why some senior housing communities thrive while others struggle?

Understanding the factors that impact senior housing performance is essential for ensuring that these communities meet and exceed expectations. Every decision plays a role in a community’s success, from financial strategies to resident engagement.

Senior housing community performance hinges on a delicate balance of planning and execution.

By recognizing and addressing these issues, owners and operators can create communities where residents feel valued, services align with expectations, and long-term success becomes achievable.

Inadequate Market Research

Failing to understand the local demographic and market demand can lead to an oversupply or misalignment of services with what seniors and their families seek.

For example, many analysts and feasibility consultants still use 65 as the qualifying age for assisted living and $35,000 annually as the qualifying income parameter. In reality, the average age in these communities is 80+. Depending on the market, the average rent is around $5,000 monthly.

Using unrealistic filters will exaggerate the size of the qualified market. Lower penetration rates make the project seem like a slam dunk when, in fact, it will be a struggle.

Undercapitalization and Financial Mismanagement

Poor financial planning, lack of budgeting, and insufficient capital reserves can hinder operations and lead to insolvency.

The biggest single miscalculation owners and operators make is to assume a more rapid lease-up than what has ever been experienced in the market.

When it doesn’t happen according to plan, everything can get very costly and stressful.

Developers and owners should assume the most conservative scenarios when projecting capital needs for these communities.

Staffing and Regulatory Compliance Issues

High turnover rates, insufficient training, and lack of qualified staff can negatively impact the quality of care and services provided, driving residents away.

When residents experience less-than-positive experiences or care outcomes, this can also lead to reputation issues and untold liability.

Non-compliance with health and safety regulations can lead to fines, sanctions, and loss of licenses, affecting the senior living community’s reputation and viability.

Inflexibility to Adapt or “Knee Jerk” Adaptation

As older adults’ preferences evolve, communities that fail to adapt their services and amenities accordingly may lose relevance in the market.

On the other hand, knee-jerk adaptation can also create problems.

When owners or operators quickly change a program to attract new customers and promote it in their marketing, they often don’t allow enough time for the changes to take effect. This can confuse the market, leaving people unsure about what the community offers. To make matters worse, they may abandon the new program if it doesn’t deliver immediate results.

We have observed operators trying to market their assisted living communities as independent living. These communities have small units without kitchens, programmed dining, and other care services, which are inconsistent with the lifestyles and values of independent living residents.

Poor Marketing Strategies

Ineffective marketing and outreach can result in low occupancy rates. If potential residents are not aware of the community or do not see its value, it may struggle to remain viable.

The senior housing market is a business based on reputation relationships. Operators need managers and marketing personnel who actually foster meaningful relationships with referral sources and follow up with urgency.

Many marketing directors have traditionally focused on paid advertising or handing out gifts and brochures to the usual suspects. This outdated approach rarely yields results in the senior living sector.

Neglect of Resident Needs or Preferences

Senior housing and care communities that do not prioritize resident engagement, emotional well-being, or physical activities may foster dissatisfaction among current residents, leading to a decline in occupancy.

Customize amenities and activities to match unique resident needs.

For memory care, programs like music therapy and sensory gardens provide comfort and cognitive support. Meanwhile, active adult communities benefit from fitness centers, social events, and recreational activities that build independence and connection.

By addressing these differences, communities can enhance the quality of life for all residents and increase living occupancy.

Infrastructure Issues

Physical deterioration of the buildings and facilities can discourage potential residents and may require costly repairs that the management might not be prepared to handle.

This issue can contribute to what is known as a “death spiral.”

When a community has a challenging time paying its operating expenses due to any of the above causes, it lacks capital for improvements. Quite often, these buildings try to use the Medicaid program to improve occupancy, which then causes problems recruiting the private-pay population.

Poor Location

If a community is situated in an area that is difficult to access, lacks amenities, or is in an undesirable neighborhood, it may struggle to attract residents.

This one is the hardest to overcome. However, if you have a program for which people are willing to go out of their way, it can be overcome with deliberate efforts and messaging.

Negative Public Perception

A poor reputation stemming from past issues, complaints, litigation, or management practices can deter prospective residents and their families. Understanding and addressing these factors is crucial for the success and sustainability of senior housing communities.