The National Picture
Though there is no universal or federal definition of assisted living, the term generally refers to a continuum of long-term care services that include a combination of housing, general health and personal care services. The rise of assisted living facilities was in response to the demand to help seniors who need assistance with everyday activities, but who still wish to maintain maximum independence.Once upon a time, assisted living facilities were akin to nursing and retirement homes. They were cold, impersonal and lacked homey touches residents both needed and craved. Over the past 30 years however, senior care professionals and living designers have revolutionized the Assisted Living Facility (ALF) concept, and now these communities truly do feel like home.
20-30+ years ago, those who were no longer able to completely care for themselves were generally taken care of by their immediate family, at least until the caregiving needs required the service of a skilled care nursing facility. A variety of factors influencing our societal norms in the U.S. have resulted in a shift away from this “way of life”; the extended family no longer takes care ofits elderly members at home. This fundamental and systemic change in our societal norm is taking place just at a time when the “Baby Boomer” population bubble arrives at the age where they will need living assistance. Fortunately, the “Baby Boom” generation is the wealthiest American generation of all time; i.e., they can afford the new assisted living care platform.
According to the Population Reference Bureau’s Population Bulletin, “Aging in the United States,” the current growth of the population ages 65 and older, driven by the large baby boom generation, is unprecedented in U.S. history. As they have passed through each major stage of life, baby boomers (between ages 55 and 73 in 2019) have brought both challenges and opportunities to the economy, infrastructure, and institutions.According to the U.S. Census Bureau’s population projections, the number of Americans ages 65 and older is projected to nearly double from 52 million in 2018 to 95 million by 2060, and the 65-and-older age group’s share of the total population will rise from 16 percent to 23 percent, this is a staggering change overall.So, the population of those who may become assisted living patrons will rise by more than 85% over the next 40 years.
In their whitepaper entitled, Looking into the Future: How Much Seniors Housing Will Be Needed?, the National Investment Center for Seniors Housing & Care (NIC) projects that for the age 80 plus household cohort using the current 18% penetration rate, there are approximately 881,000 additional units of senior housing inventory that will be needed in the US between 2019 and 2030. That demand increases modestly in the next few years but spikes appreciably in the second half of the next decade; i.e., 2025. In 2018, approximately 54,000 units of senior care were brought online. By 2027, the need is projected to be nearly 135,000 units per year. All those projections assuming that the penetration rate, the proportion of seniors looking for housing, doesn’t grow from the current rate. We actually expect this penetration rate to increase substantially due to the record setting financial capability of the Baby Boomer generation. But for these examples we will use past and current penetration rates.
These confluences of assisted living care becoming a mainstay necessity for our elderly AND, the elderly population increasing significantly for the foreseeable future will create unprecedented demand for AL facilities within the next 10 years and provide a uniquely profitable, and stable investment opportunity. Please understand that our investment goal is to “anticipate”, not “react”. The population figures spell it out in black and white; the explosion occurs in 2025; we are setting ourselves up to be completely established with 16 facilities in THE most attractive senior living regions in the country. Don’t get us wrong, this sector will be very active over the next 5 years; you will hear the talk growing intensely during this time. Once we hit the wall in 2025, demand will become insatiable as the development community WILLNOTbe able to keep up with demand. This is when we will be positioned to sell into the mania demand environment.
The above statistical data by the NIC is dramatic to say the least. Although there are not detailed statistics that relate to a local analysis, we believe that the Virginia/North Carolina region will significantly outpace the national scene as this regional locality has perennially exceeded retiree statistics for decades. This is caused by northeastern retirees moving to Florida for retirement but finding the separation distance to be affecting in familial contact; thus, the once Florida retiree moves “halfway” (hence the moniker, “halfways”) between Florida and their Northeastern roots. Why? The retiree still wants a break from the weather but wants to be nearer the family. Therefore, we find an abundance of Florida retiree’s moving to North Carolina and Virginia region. This has been our core business for the past 35+ years; i.e., building multimillion dollar custom homes for “halfways” and Virginia Northeasterner retirees. When they come of assisted living age; they stay. This dynamic will offer a significant opportunity for us in the Assisted Living sector.
Assisted Living ~ The supply side of the Market
Assisted Living facilities (ALF) are regulated and licensed at the state level. More than two-thirds of the states use the licensure term “Assisted Living”, with each state licensing agency having its own definition of the term. In the continuum of care, Assisted Living bridges the gap between home care and nursing homes, providing services for those who do not require the level of care provided by a nursing home, but are not able to live totally “independent”. ALF residents may also need dietary assistance, personal care, or require supervision due to a cognitive impairment and require Memory Care(MC) assistance. Please note; at this time, we are NOT considering the Memory Care sector at any level.
The Assisted Living market is not dominated by any one corporate entity. There are definitely major players who are well established in this Health care sector, but no one actually dominates it. Also, 95% of the participants are “privately” held; i.e., Wall street is not yet a player in this investment sector. Virginia’s largest resident player is HHHunt, originally a Richmond based residential homebuilder, but also a Top 50, nationally ranked Assisted Living facility principal. A homebuilder it may be, but it is extremely successful in the general assisted living business.
Currently, demand is quickly stripping supply and once the Baby Boomers enter this market over the next two decades, supply will be overcome as lead times for development and construction will not be able to meet demand. Currently, significant application deposits are being required to “hold” ones place in line. There are currently two facilities beginning construction in the Richmond metro area and both are already fully subscribed with waiting lists before completion. Market trends indicate, at some point in the near future, we will see “non-refundable” application fees required in order to guarantee a place in a newly constructed facility.