Important Questions Loom on Senior Housing Horizon

Senior citizens or their families looking to move into independent living senior housing or assisted living will find fewer bargains this year in Atlanta. The consensus among experts who track the senior living market is that prices in the metropolitan area have tightened as the demand has rebounded after a substantial dip during the pandemic.

The metropolitan Atlanta area, which was overbuilt in recent years by an anticipated demand created by aging baby boomers has seen the glut of units begin to be absorbed.

Occupancy rates in well managed, well situated properties, hover around 90 percent or above, even in properties that are priced at the very top of the market.

All these changes are occurring at a time of economic change and increasing uncertainty about the future of the national economy. In a recent discussion of senior housing trends, Martin Atkin, a senior investment advisor for the Alliance Bernstein wealth management group, commented that since the beginning of the year, the chance of a recession has increased dramatically.

“The market appears to be pricing in more or less a 50 percent chance of recession,” Atkin comments. “We think, whereas at the beginning of the year, we’d have said a 15 percent likelihood of recession in 2025, now we say a 50 percent. So, it’s moved from not going to happen to likely to happen. Recession, technically, is two negative quarters of gross domestic product, or GDP growth.”

As demand has returned to the market, the development of new properties has slowed. The slowdown, in the opinion of experts, has been driven by rising material costs, labor shortages and now, in recent months, economic uncertainty.

According to the National Investment Center (NIC), which provides research and professional education to the senior housing industry, last year only 10,000 senior housing units were delivered in the U.S., the smallest number of new apartments in more than 10 years.

Despite all the discussions about the cuts in federal government spending during the first quarter of this year, Atkin believes that, taken together, total federal spending is not anticipated to change much.

“The administration’s Department of Government Efficiency, DOGE, exists, and potentially, they’ve cut some costs, but where they were working is at the margins,“ Atkin says. “The big contributors to spending at the federal government level are Social Security, Medicare, Medicaid, debt service, and the military. Everything else is a peanut compared to those five. Some people refer to the U.S. federal government as being an insurance company with a military wing. And none of that’s changing,”

And the trends in senior housing are also not likely to change anytime soon. NIC, as the research organization, says that in the first quarter of 2025 breaking ground for new units in the 31 primary markets in this country, including Atlanta, were at their lowest level since 2009.

At the same time, reports suggest that demand in the senior housing industry will grow by nearly $100 billion by 2027. The anticipated expansion is due to the growth of the population that was born in the decade-and-a-half after World War II reaches retirement age. It’s a population trend that is already being reflected in the market. Seniors increased by almost 39 percent from 2010 to 2020, the fastest growth in more than a century.

And the trends in senior housing are also not likely to change anytime soon. NIC, as the research organization, says that in the first quarter of 2025 breaking ground for new units in the 31 primary markets in this country, including Atlanta, were at their lowest level since 2009.

Even though there are more Americans reaching retirement age than ever before, the distribution of wealth is a lopsided statistic. While the longevity economy, as this segment of the market is termed, is valued at an eye popping $8.3 trillion annually, according to the Federal Reserve, 80 percent of these older households control only 20 percent of the wealth. A study by the Alliance for Lifetime Income last year reported that 53 percent of baby boomers who will turn 65 between now and 2030 have less than $250,000 in retirement assets.

Census statistics show that just over half of the estimated 73 million Americans reaching retirement age by 2030 won’t have a lot of money to live on. Ever more dramatic by 2040, the population of those 80 and over, when senior housing and assisted living services begin to rapidly accelerate, will nearly double.

Unless all these trends are suddenly reversed, private investors who are responsible for much of the new construction in senior housing are likely to have few choices on how they approach new projects. They can either put their money in a limited and shrinking luxury market, which is already apparent in new or expanded projects in Atlanta, or they can invest in a much broader, middle market where pricing and returns on investment are likely to be more problematic.