By Lee Cory, President and Founder
Paradigm Senior Living, Est. 1994
I began my involvement in the senior living industry as the Executive Director of a community in Central Oregon in 1984.
Since then, I have been continuously involved in the industry in roles as development coordinator, operations executive, CEO, owner-operator, investor, and, most importantly, as a family member who has navigated the challenges of placing loved ones into community-living environments.
Simply put, over the last 30+ years, I have viewed the senior housing market from every perspective.
As I reflect on my journey and the experiences that have shaped my understanding of the industry, I want to share a hopeful outlook on where we’re headed. The challenges and insights I’ve encountered have not only provided clarity about the current state of our field but also illuminated a bright future brimming with potential.
Let’s explore what’s next, along with promising developments on the horizon.
Senior Housing Market Data & Marketing
We market our housing and services to adult children and advocates of seniors who may require our services. While we have our proprietary methods for evaluating markets, it doesn’t remain easy to map, tabulate, and precisely calculate the depth of any given market.
We are conservative in our approach to evaluating market demand for senior living. This conservatism primarily stems from the awareness that the data is not 100% absolute.
We’ve spent the last 40 years marketing these communities and have an acute understanding of the challenge senior housing occupancy development has been — and will continue to be — for operators in the future.
This challenge is partially due to continuously evolving demographic trends and the ever-changing lifestyle preferences and values of older Americans.
Further complications arise because the current rates in most markets for private-pay assisted living and memory care are rapidly becoming unaffordable to most families.
For example, Paradigm performs multiple market studies throughout the U.S. We typically set the qualifying income for the resident at $50,000 a year and the qualifying age at 75-plus for virtually all product types, except perhaps true “Active Adult” (a la Del Webb-type communities), which we then lower the age to 70, and increase the income threshold to $75,000.
We do this with the understanding that these incomes alone will not typically allow residents to afford private-pay senior living communities. Data has proven that most seniors and their families have other income and financial assets or long-term care insurance that will offset the cost of senior care.
Our experience has shown that in most markets we have evaluated over the past 10 years, three out of four seniors over the age of 75 cannot meet the income requirements, meaning only roughly 25% can qualify financially.
Suppose you look further at current data regarding the level of retirement savings for people over the age of 65 and 70. In that case, it’s no surprise that people wait until the last possible minute to move into a senior living community, as nobody wants to outlive their money.
Most reports indicate that the average retirement savings for people over the age of 75 ranges from $280k to a bit over $600k. The average baby boomer is somewhere in the middle.
Depending on other living expenses and many other economic and lifestyle factors, this may cover the cost of community-based care for about three to four years. Given these trends, it’s perfectly understandable why most seniors and families of those seniors wait almost until it’s too late to make this decision.
From a purely marketing standpoint, senior living admissions are nearly all reputation, referral, and relationship-based. Adult children seek out communities through the Internet and social media. We find that professionals rely mainly on trusted prior relationships and are increasingly relying on third-party paid referral sources in lieu of forming new, meaningful relationships, given time constraints in their workload.
Not that long ago, sales and marketing strategies were primarily dependent on yellow page listings, drive-by visibility, or TV, newspaper, and radio advertising. Word-of-mouth referrals were not so prevalent.
While the new approach has its challenges, we see this change as a good thing because it has streamlined the “funnel” and made marketing less costly than it was in the past.
Operations
We have survived many economic cycles, financial meltdowns, the COVID-19 epidemic, nursing and staffing shortages, and increased government regulations. Now, we must manage all these factors on a daily basis.
Margins continue to shrink primarily due to wage and general inflation. As an industry, our ability to raise rent fast enough to compensate for these increasing operating costs and still remain price competitive is very challenging, sometimes resulting in the need to close the community altogether.
The most significant change and challenge that we have confronted in recent years has been the fact that people wait until the absolute last minute to enter assisted living and memory care. This choice used to be more lifestyle-based on denial and a desire to stay in the family home until the very last minute.
In many markets, we need to admit six to eight residents a month just to net four move-ins. This is primarily due to death, a higher level of care, or financial reasons. This makes for longer absorption periods for new communities and a different set of challenges for stabilized communities.
Adding to the complications is the fact that many urban and suburban markets are either overbuilt or on the verge of being overbuilt, resulting in many communities offering extreme incentives to compete on price.
I believe that because senior living communities have become so expensive, it has forced many into waiting until they almost don’t qualify for assisted living based on their care needs.
Over the past 15 years, we have seen resident turnover rates go from 20% to 30% to 40% and now almost 50% in some communities. The average length of stay in some communities is also only one year when it used to be two, three, or four years or more.
This current setting presents a number of challenges.
If our residents now come with multiple chronic, complicated medical conditions, we then must hire more skilled staff and more experienced supervisory and management personnel. Since their length of stay is typically shorter, given their entry with higher care needs, we have to market units more frequently. All of these factors increase the overall operating costs.
The shortage of staff in many markets requires most operators to turn to excessive overtime or, in worse cases, temporary staffing agencies, which dramatically contributes to shrinking margins.
These conditions can also create additional professional liability exposure, which in turn increases insurance rates. The insurance industry has accurately realized the profile of the typical assisted living/memory care resident, which is remarkably similar to what it was in nursing homes twenty years ago.
When you add it all together, this makes for a perfect storm.
From my perspective, this is a continuing trend, not a simple storm that we need to navigate through. I don’t see this changing any time soon, other than perhaps for CCRCs (continuing care retirement communities) and truly independent, active adult communities.
That said, we remain confident that the industry will present many excellent opportunities to continue providing senior housing and services.
How Strategic Insight Can Transform Your Project
It’s important to clearly understand the landscape and develop long-term solutions for success rather than just coping strategies.
We’d love to hear from you, whether you are considering entering the industry, are currently in the industry, or are facing senior housing occupancy/operating challenges.
We would be happy to discuss your project and how we might help you successfully navigate the current landscape and achieve success as an owner, operator, lender, or investor.
If, after an initial conversation about your plans/project, we cannot clearly articulate concepts that could add value to your project over time, we will tell you.
We believe our 30+ years of experience can save you considerable time and money, whether in development, design, finance, marketing, or operations.
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Charting a Path to Your Success in the Senior Housing Industry
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