Adult and Retirement Communities
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Adult and retirement communities were among the housing industry's prize sectors in the 1990s, and demographics promised a healthy market well into the twenty-first century; the elderly portion of the U.S. population was not expected to peak until past 2010. And while supply outpaced demand in the late 1990s, leading to some minor market jolts in 1998 and 1999, there were few fears of anything short of explosive growth in the 2000s. However, the early years of the first decade of the 2000s brought a depressed economy, causing many potential retirees to extend their time in the workforce, and consequently there was an overabundance of retirement housing. Amidst these conditions, investors became more cautious and senior housing construction capital became extremely scarce. However, by 2006, industry conditions had improved. Individual and institutional investors had begun to invest in housing for older adults again. While the number of public companies involved in the industry had declined, those that remained saw their stock prices skyrocket.
By the twenty-first century, America's elderly population was rapidly expanding, with women aged 80 and older as one of the fastest-growing segments of the U.S. population. This trend was expected to continue, as approximately 77 million baby boomers would enter their retirement years, beginning in 2010. The Administration on Aging estimated that by the year 2030, the United States would have more than 85 million people over the age of 60. Further, the U.S. Census Bureau's projections reflected an increasingly aged population as well. In 2000, there were approximately 72,000 people 100 years of age or older. By 2050, there was to be a projected increase to more than 84,000. Population figures for the traditional elder demographic range promised growth as well. The U.S. Census Bureau reported that in 2000, there were about 11.5 million people over the age of 75, and this number was expected to exceed 25 million by the year 2020.
The adult and retirement community industry consists of a variety of facility options catering to the needs of residents aged 55 or older. These communities offer residences and, at times, special care for their occupants. According to the National Investment Center in Annapolis, Maryland, which monitors growth in the seniors housing industry, the four categories of senior living are senior apartments, active adult communities, and owner-occupied housing; continuing-care retirement communities (CCRCs), congregate-care facilities, independent-living units in CCRCs, and board and care living facilities; assisted living in congregate and CCRCs and board and care facilities; and nursing homes and skilled nursing units in congregate, CCRCs, and hospitals. CCRCs often evolve with a certain theme; for instance, a resort community may offer recreational activities, while a healthcare community may offer nursing care.
Since 1992 the American Seniors Housing Association (ASHA) has followed and reported on the adult housing industry. The association was started by the National Housing Council and, along with Coopers & Lybrand, L.L.P, publishes annually the leading 25 managers and owners of seniors housing in the United States. ASHA also serves as a membership organization for companies involved in seniors housing and provides research and industry statistics. Another major resource and forecaster in the seniors housing industry is the National Investment Center (NIC), which held its first conference in 1991. The NIC offers information and data monitoring the financial state of the industry. Updates on loan volume, occupancy rates, move-in rates, and construction are available on a quarterly basis. NIC's research publications are available for sale through its Web site.
The industry was initially developed by nonprofit organizations, religious orders, and social service groups. During the 1990s, Wall Street took notice, and there was an infusion of capital in the industry. By the early years of the first decade of the 2000s, investors disappeared, and construction declined. This was not entirely an unwelcome development. Industry observers feared that the senior housing market had become too corporate, and not enough care was given to the needs of the residents.
Periodically, the industry has moved toward some type of government involvement. In the mid-1990s, the majority of senior housing was private pay, but some states had begun to allow Medicaid waivers for assisted living residences. Government involvement generally came in the form of regulations imposed as a condition of state and federal reimbursements. While many industry players, such as market leader Colson & Colson/Holiday Retirement Corporation, decried government intervention as a stifling intrusion, others, especially those in the nursing home sector, found themselves pushing for greater government involvement in the late 1990s. The federal role in the nursing home industry was diminished in some ways, particularly in federal budgetary cuts on sub-acute nursing home care, which would probably increase the pace at which nursing home operators scrambled to attract private investment. In the early years of the first decade of the 2000s, the industry was studying the European model, which can be described as a more socialized system. In Highland Park, Illinois, the local government donated a parcel of land to provide low-cost senior housing in the otherwise affluent suburb. However, this is not the norm, and the future of the industry continues to be linked to the economy and corporate investment.
Like the housing industry as a whole, the retirement communities and seniors housing industries are exceptionally cyclical. The industry's nearest relative is the hotel and multifamily sectors. In general, however, both occupancy rates and rents were slightly higher in the seniors housing industry than for either multifamily housing or lodging, thus yielding greater revenues.
Adult and retirement communities first began as simple housing options for people entering their retirement years. The basic focus of these communities was to lure those seniors who were able to remain independent and who were willing to give up their homes in favor of living in a residential area with other people their age. Unfortunately, until the 1980s, the industry was not able to attract the number of seniors it had anticipated. Leaders in the seniors housing market discovered that seniors were not interested in giving up their homes as they grew older unless new adult communities could provide value-added services. Once builders and managers realized what it took to attract seniors, the industry, especially assisted living facilities, took off, increasing by 24 percent during the 1980s.
The dramatic growth in the retirement sector through the 1980s, however, resulted in a glut by the end of the decade, leading to massive financial restructuring. Analysts attributed the overbuilding...
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