For example, as seniors begin to outnumber younger generations, industry watchers expect to see an exponential increase in demand for senior housing as the need for such developments as student housing, shared rental units and first homes declines. In fact, Census Bureau analysts expect that U.S. home ownership rates will continue to decline from their peak in 2005 of 69.1 percent as younger generations opt for apartments and shared living spaces over buying a home. The real estate industry is responding to this shift with greater focus on accessible retail locations, home working environments and less traditional retirement communities.
“Industry experts expect to see the demand for senior housing more than triple by 2040.”
The Boomer boom
This shift is being driven in large part by Baby Boomers reevaluating their retirement goals, says Ryan Marshall, president of PulteGroup Inc. “If you go back 20 or 30 years, when folks hit that magic age of 65, they fully retired,” he says. “They had the big retirement party. A lot of them had pensions, and they never went back to work again. They were done.”
Many of them moved to retirement communities in Florida and Arizona, designed for active retirees and packed with amenities such as pools, golf courses and organized activities. No more. “What we are seeing today is that about half of retirees are planning to remain engaged in the workforce in some way, shape or form,” Marshall says. “That changes where and how they decide to retire.”
Increasingly, Boomers are looking to stay closer to home when they retire, plugged into their existing social and professional networks. To meet this new demand, Pulte’s Del Webb division, which specializes in active retirement communities, is building smaller developments closer to urban areas with fewer amenities and lower fees. “We’re finding success when we build them right in the areas where (retirees) already live,” Marshall says. “They can downsize their homes but can keep their social network.”
Changing demand for senior housing
The senior housing industry, which includes independent living, assisted living, continuing care and memory care, is also adjusting to meet the changing needs of an older society, says David Schless, president of the American Seniors Housing Association (ASHA). As in the active retiree segment, seniors who need assisted-living options often prefer to live closer to their families and support networks. “For independent older adults, we’re seeing more interest in moving into urban areas where they can get out to shopping and restaurants,” Schless says. And the developments themselves are changing, he adds.
Today’s assisted-living communities, which provide more caretaking services than do active retirement communities, offer bigger living spaces and more amenities, such as Internet access and Wi-Fi—technology that previous generations didn’t want or need. “Anyone who is building any type of senior living today is paying attention to technology and wiring, anything that can make the building more efficient and the space more livable,” Schless says. “We’re on the cusp of seeing a lot of new technologies being built into new communities that will improve the health and well-being of the residents and make the staff as efficient as possible.”
Another significant housing shift is that with extended life expectancy, many seniors stay in their house for longer than previous generations did. As a result, many don’t start looking for continuing-care options until they are around 80 years old. As Boomers start crossing that threshold, though, demand for all types of senior housing units will grow exponentially, Schless says. To meet this demand, production of senior housing units will need to grow from 25,000 a year between 2015 and 2020 to 96,000 a year between 2030 and 2035, according to ASHA.
Increased longevity is also generating demand for specialized services such as memory-care facilities. “Twenty-five years ago, if someone wasn’t being cared for at home, they went into a nursing home,” Schless says. “Today, there are a broad range of services and support for individuals with Alzheimer’s or dementia and their families.”
The growing preference for aging in place is also forcing housing and other industries to rethink how they will meet the changing needs of seniors. For example, retrofitting homes to make them more accessible as old-age disabilities limit mobility can cost tens of thousands of dollars, Schless says. And as capabilities decline, seniors will need more help with some of the daily tasks that are easily taken for granted when we’re able-bodied. In fact, home health aid is one of the fastest growing job categories in the country, according to the U.S. Bureau of Labor Statistics.
As a result, the aging-in-place phenomenon is spawning an entire new industry built around homecare for seniors. One recent startup is eCaring, a venture-backed company that provides cloud-based technology for caregivers and patients to track home health care. eCaring’s system is designed to reduce emergency room visits and hospital stays by generating real-time health data from the home. The collected information triggers alerts that can allow caregivers and medical professionals to intervene before a cough turns into pneumonia, for example. The company reports that it delivers users a 400 percent return on investment by reducing medical costs, providing $4,000 in average annual savings for clients.
Other new companies targeting this demographic include food delivery services that provide not only groceries, but also meal planning and recipes. Increasingly popular on-demand driving services are also benefitting from this fast-growing demographic.
Even as demographics and demands shift, though, PulteGroup's Marshall is bullish on the housing industry. “We see the industry continuing to be on a very positive trend,” he says. “There are nearly 76 million Baby Boomers, and in general this group is wealthy with very high homeownership rates.”
So when they are ready to make a move, they can afford it. In fact, more than 40 percent of Pulte’s buyers who are ready to downsize pay cash for their new homes, using a combination of savings and equity from the homes they are selling. “New home sales are still below historical norms,” Marshall says. “But we believe the housing market is on a slow and steady recovery.”
PGIM is the primary asset management business of Prudential Financial, Inc. (“PFI”) and is a registered investment advisor with the US Securities and Exchange Commission. PFI, a company with corporate headquarters in the US, is not affiliated in any manner with Prudential plc, a company incorporated in the United Kingdom.