More than half of middle-income seniors will lack financial resources for senior housing and care by 2029

Demographic shifts in the United States over the next decade will nearly double the number of middle-income seniors ages 75 and over — more than 14 million people — lacking the financial resources to afford senior housing with supportive personal care services, a new study shows.

The study, published by the journal Health Affairs and also scheduled to appear in its May 2019 edition, identifies a vast new “middle market” for the senior housing and care industry and underscores the need for government and private sector actions to ensure middle-income seniors can afford the housing and care they will need.

The study was conducted by researchers at NORC at the University of Chicago, with funding provided by the National Investment Center for Seniors Housing & Care, with additional support from AARP, the AARP Foundation, the John A. Hartford Foundation, and The SCAN Foundation.

“We still have a lot to learn about what the emerging ‘middle market’ wants from housing and personal care, but we know they don’t want to be forced to spend down into poverty, and we know that America cannot currently meet their needs,” said Bob Kramer, NIC’s founder and strategic adviser. “The future requires developing affordable housing and care options for middle-income seniors. This is a wake-up call to policymakers, real estate operators and investors.”

Most middle-income seniors will not be able to afford senior housing in 2029

Researchers found that more than half (54 percent) of middle-income seniors would not have enough assets to cover projected average annual costs of $60,000 for assisted living rent and other out-of-pocket medical costs a decade from now, even if they generated equity by selling their home and committing all of their annual financial resources. That figure rises sharply, to 81 percent, if middle-income seniors in 2029 were to keep the assets they built up in their home but commit the rest of their annual financial resources to cover costs associated with seniors housing and care.

Said another way, only 19 percent of these middle-market seniors are projected to have the financial resources to afford housing and care in 2029 if they do not sell their home to use the equity for senior housing.

These significant financial challenges are expected to coincide with many middle-income seniors seeking senior housing and care properties due to deteriorating health and other factors, such as whether a family member can serve as a caregiver. The study projects that by 2029, 60 percent of U.S. middle-income seniors over age 75 will have mobility limitations (8.7 million people), 67 percent will have three or more chronic conditions (9.6 million people), and 8 percent will have cognitive impairment (1.2 million people). For middle-income seniors age 85 and older, the prevalence of cognitive impairment nearly doubles.

According to the study, the middle market for senior housing and care in 2029 will be more racially diverse, have higher educational attainment and income, and smaller families to recruit as unpaid caregivers than seniors today. Over the next 10 years, growth in the number of women will outpace men, with women comprising 58 percent of seniors 75 years old or older in 2029, compared with 56 percent in 2014.

Public and private sectors have roles to play in meeting needs of middle market

“In only a decade, the number of middle-income seniors will double, and most will not have the savings needed to meet their housing and personal care needs,” said Caroline Pearson, senior vice president at NORC at the University of Chicago and one of the study’s lead authors. “Policymakers and the seniors housing community have a tremendous opportunity to develop solutions that benefit millions of middle-income people for years to come.”

Senior housing in the United States is paid out of pocket by seniors with sufficient assets. A relatively small percentage of Americans have long-term care insurance to defray the costs. For seniors with the lowest incomes, Medicaid covers housing only in the skilled nursing setting, but increasingly also covers long-term services and supports in home- and community-based settings. Programs such as low-income housing tax credits have helped finance housing for economically disadvantaged seniors.

Researchers say there is an opportunity for policymakers and the senior housing and care sector to create an entirely new housing and care market for an emerging cohort of middle-income seniors not eligible for Medicaid and not able to pay for housing out of pocket in 2029.

The analysis suggests creating a new middle market for senior housing and care services will require innovations from the public and private sectors. Researchers say the private sectors can offer more basic housing products, better leverage technology, subsidize middle-market residents with higher-paying residents, more robustly engage unpaid caregivers, and develop innovative real estate financing models, among other options.

They say government can create incentives to build a robust new market for middle-income seniors by offering tax incentives targeted to the middle market, expanding subsidy and voucher programs, expanding Medicare coverage of non-medical services and supports, creating a Medicare benefit to cover long-term care, and broadening Medicaid’s coverage of home- and community-based services.

“This research sets the stage for needed discussions about how the nation will care for seniors who don’t qualify for Medicaid but won’t be able to afford seniors housing,” said Brian Jurutka, NIC’s president and CEO. “This discussion needs to include investors, care providers, policymakers and developers working together to create a viable middle market for seniors housing and care.”