Middle Class Senior Care: Cavernous Gap In Affordable Services

The National Investment Center for Seniors Housing & Care released their study in the spring of 2019:  The Forgotten Middle: Middle Market Seniors Housing Study   I just recently became aware of the report as several news outlets covered it. 

The report looks at the ability of the fast-growing senior populations ability to afford senior living services in 2029.  Not surprisingly, the study finds that the majority of seniors will not be able to afford to pay the expected average cost of senior living of $60,000 per year even though they will need it and want the service. 

The study concludes that this inability to afford senior living will adversely affect governments as families are forced to spend down until Medicaid takes over.  This creates a substantial drain on state and federal resources.  It affects families who need to spend the resources of multiple generations to care for parents.  The headline conclusion from the study is that if the average expense could be reduced by $10-15,000 annually, the demand for senior living would increase dramatically. 

The study authors also conclude that the senior living industry needs to figure out how to develop a housing product for the broad middle class.  There appears to be a significant business opportunity for the right investors and entrepreneurs.  They identify a political risk by observing that if the industry is only seen as focusing on upper income seniors, then there will be push back from politicians as the majority are not able to find housing and healthcare to fit their needs.

As a senior care entrepreneur, I immediately found this article provocative.  The are not many senior services designed for the broad middle class.  What is readily available in the Atlanta area is either designed for the low-income seniors and is governmentally subsidized or it is expensive and designed for higher income seniors.

On the low-income side, there are several options.  There are low-income 55+ communities.  These are usually subsidized by the US Department of Housing and Urban Development or local housing authorities.  There do not appear to be many of these building under construction.  Many that exist in Atlanta are several decades old; although, some have undergone some recent renovations.  The Darlington, a fixture in Atlanta for decades and known by its sign with the Atlanta population numbers, recently converted from a low-income housing building to a market rate building.  I have seen some low income properties developed in the 55+ space using tax credits.  While all these communities serve a large need in the community, they do not offer extensive assistive services.  Essentially, these are apartment communities, for independent seniors. 

Another option for low income seniors are smaller personal care homes.  These are smaller, older buildings ranging in size from 2-3 rooms on the low end to 30-40 beds.  If the building is under 24 beds, the community can enroll in Medicaid.  These communities generally offer personal care services.  The services offered are generally lower priced, but very limited in services.  Staffing ratios can be higher.  Activities programs are limited or non-existent.  There are some small buildings that charge higher rents, but mostly, these rents are lower.

The vast majority of what is being built today targets the higher income seniors or high-income children who are willing to subsidize their parents.  These properties are financed institutionally.  These investors expect high returns to justify their investments. The primary focus of the assisted living industry is high rent for high income.

Most cost studies such as Genworth’s 2018 Cost of Care Survey peg the average cost of assisted living in the $3,500 to $4,000 range.  It’s misleading.  The average includes senior living aimed targeted for low income seniors.  It also includes the newer, fancier buildings.  For the lower priced communities, the pricing might be in the $1,500 to $2,500 range.  For the newer, fancier communities, rents might officially start in the $3,500-$4,000 range, but quickly increase.  The monthly rent increases once extra charges for laundry, utilities, medication management, housekeeping, and personal care services among others.  The actual monthly expense can quickly increase to more than five or six thousand dollars.  For memory care, the expense can go higher still.  In some cases, families are then required to hire a home care aide for 24×7 individual coverage, which pushes the costs still higher.  When the money runs out, the individual is forced to move out to find less expensive options or utilize Medicaid elder care services. 

It’s no wonder that most won’t be able to pay for senior living in 2029.  Most can’t pay for it in 2019 either.  The gap is real right now. This is a significant challenge for seniors and their families.  For many families it is a significant pain point.  They are solving the problem by dipping into savings, providing free labor, and quitting the work force. 

This is an opportunity for the entrepreneur.  The problem exists right now.  We need to identify the solutions now in order to meet the demand for care in 2029.

What do you think? What solutions are available for middle income seniors?

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