Mid-Income Seniors Get More Housing Options

A growing number of seniors—many of them baby boomers—is facing a conundrum: they have too much money to qualify for government housing subsidies but not enough to afford to live comfortably in a traditional senior community, whether it’s a nursing home, assisted living or continuing care retirement community. In 2021, the monthly median cost in Michigan of a one-bedroom apartment in an assisted living building was $4,250. By 2028, the cost is expected to rise to about $5,300.

For those seeking to move into independent senior housing—essentially apartment buildings that may offer community activities and services that you pay extra for such as housekeeping and transportation—it also is a financial challenge.

Middle-Income Seniors: A Growing Demographic

By 2029, there will be 14.4 million middle-income adults 75 and older in the U.S. (six million more than today), and more than half won’t be able to afford senior housing at today’s average market rates, according to the 2019 Middle Market Seniors Housing Study by the nonprofit National Investment Center for Seniors Housing & Care (NIC). In addition, more than half will have mobility limitations and 20% will have a high healthcare and functional needs.

Middle-income seniors, the so-called “forgotten middle,” are defined as those between 75 and 84 years old who have annuitized financial resources—money they can pull from a retirement account, alimony, and other funds—in the range of $25,001 to $74,298, and those aged 85 and older with resources of between $24,450 and $95,051.

Other findings from the study include:

  • Of these 14.4 million seniors, 46% will have the means to pay the estimated $60,000 annual cost of senior housing and out of pocket medical costs. Another 2.3 million middle-income seniors would be able to afford housing and medical costs if housing were cut by $10,000, to $50,000.
  • At today’s utilization rates, more than 700,000 units of seniors housing will be needed by 2029 to meet demand by middle-income seniors.

Every day a baby boomer (defined as someone born between 1946 and 1964) turns 75. One in five doesn’t have children. If they aren’t served by housing models that are affordable, the government may end up supporting those who “spend down” their financial resources so they become eligible for Medicaid, which covers long-term care. It would squeeze people who are on Medicaid and cause a major drain on taxes, the study points out.

Fortunately, the opportunity to serve the middle market has attracted some senior housing developers, says Beth Mace, chief economist at the NIC and co-author of the study.

“When we released this study in 2019, we really brought to light the need for services, care and housing for middle-income seniors, she says. “It showed not just the need but the opportunity.” The NIC gathers data and analyzes trends in the senior housing market for property developers, housing operators and other stakeholders.

Understanding the Housing Needs of Middle-Income Seniors

Mace and Ryan Brooks, a senior principal at NIC, cited several factors middle-market housing developers should consider:

  1. Focus groups have shown that that middle-market seniors are less interested in high-end amenities, elegant meals and customized services. They would rather have value, peace of mind and independence. That means they don’t necessarily want to pay for weekly housekeeping, servers in the dining room, fitness instructors and granite countertops.
  2. Locate communities within walking distance to shops and restaurants and near public transportation. It saves money on shuttle service.
  3. Offer a la carte services so that residents can choose when they get services such as housekeeping and meal plans.
  4. Labor is the biggest cost for senior facilities. To reduce the cost, use universal workers. Cross train the workforce so that employees shift to where needs are greatest.  That might be answering phones or leading a class.
  5. Reduce staffing costs by having residents volunteer doing something that they love—assisting in the library, running the book clubs, or tending to the gardens and landscaping. This kind of engagement can be a win-win for residents who want to be engaged in the life of the community.
  6. Partner with nearby restaurants to provide meals to residents at a discounted rate. This reduces the need to maintain a commercial kitchen and staff. In some cases, it could even eliminate on-premises dining.
  7. Contract with a home care agency that can dedicate staff to a building. Care can be delivered to the residents when they need it rather than all the time. Residents would pay for only the services they need. This care model, however, may eliminate middle-income seniors who require a lot of care, which becomes expensive.
  8. Property developers can keep costs lower by buying distressed assets like senior housing properties facing bankruptcy, motels, shopping centers and office buildings. Developing multiple sites and replicating a building model and design that has been shown to work may be cost-effective.

New Innovative and Affordable Senior Housing Models Take Root

Merrill Gardens, a Seattle-based property development company, has checked those boxes with its middle-market option, called Truewood by Merrill Gardens, which has spread to 20 states (not Michigan). The average rent is $3,500, and the average age of residents is 84.

Unlike most senior communities, Truewood doesn’t have leases; it’s month to month. There’s one meal per day that is served; the others are self-serve to cut back on the need for waitstaff.

In addition, employees are cross-trained so that they can jump in where they are needed. Merrill Gardens redeveloped a senior housing complex to create Truewood.

“Our biggest reason to launch Truewood by Merrill was to serve a broader population of seniors,” says CEO Tana Gall said. “These are people who were teachers, policemen, nurses, government workers who have saved for retirement but maybe not enough to live in a traditional retirement community. They deserve quality senior living too, and we have a desire to serve them.”

Other affordable options for middle-income seniors include 2Life Communities’ Opus, outside of Boston. Once 70% of its 174 units are leased, construction will begin. Residents will be asked to volunteer about 10 hours per month on community projects. Opus will have on-site care advocates and partner with providers to keep health care costs lower for residents.

According to Senior Housing News, an increasing number of senior housing operators are looking at middle market options that include campuses of modular or prefabricated homes and apartments that are arranged like neighborhoods around common spaces. Other communities are based on a multi-generational, multi-ability model. Some will have residents volunteer to work in order to offset labor costs.

Mace foresees living arrangements where younger people might move into an older person’s home and in exchange for lower or no rent, help the person with daily care or housekeeping.

“My feeling is some baby boomers coming along, you’ll see lots of options; intergenerational housing, women only; this is the generation that grew up in the Sixties, so you’ll see communal situations,” she says.

There are challenges in providing senior housing that is within reach of middle-income seniors. In order to participate, for example, residents need to be in relatively good health.

“It’s a tough nut to crack,” says Mace. “Right now, there’s an acknowledgement that if you’re a middle-market senior, you may need less acute care. As you have higher acuity, you have higher labor needs. It’s hard to do that in a cost-effective way. It’s a challenge. I don’t know if anyone has figured that out.”