CREJ

Page 28 — Health Care & Senior Housing Quarterly — July 2021 www.crej.com SENIOR HOUSING — TRENDS I n the spring of 2019, the National Investment Center for Seniors Housing & Care released the most extensive study ever conducted into the future of senior living, called The Forgotten Middle. One of the fascinating data points from the NIC research showed as the baby boomers age, the size of the mid- dle-income senior population will nearly double by 2030, equaling 15 million seniors between 75 and 80 years old. To provide context, the industry defines middle-income as those who receive between $51,800 and $65,505 annually. While senior housing investors generally have focused on higher-income customers, this wave of middle-income seniors will force the industry to look com- pletely different in the future than it does today. The confluence of low supply affordable housing options with the high demand will equate to an industry ripe for outside disrup- tion. This provides the commercial real estate industry an opportunity to penetrate senior living with an effi- cient, intelligently designed afford- able housing model. For the past seven years, senior housing has been ranked No. 1 among all types of multifamily/apart- ment investments. While commercial real estate investors and developers may assume that building affordable senior housing is as simple as lower- ing investment return expectations by charging less rent and reduc- ing profit margins, tenured senior housing investors know it is not that simple. This lack of cash flow presents the most significant chal- lenge. Fortunately, many experts are confident the debt piece will be there to finance middle- market projects if new players can spotlight innovative ideas in develop- ment and regula- tions. If the industry is genuinely due for disruption, leading to more affordable options, developments need to push the limits around existing commer- cial design regulations. Confronting class preference in many of our out- dated zoning rules could make a big difference. For example, local munici- palities’ strict regulations mandat- ing architectural themes, exterior building design, building composi- tion, materials used, parking guide- lines, energy conservation standards and other significant modifications increase development costs. While these developments may look bet- ter to the eye, the increased cost to design and build this way decreases the viability of an affordable senior housing option. Ideally, these local municipalities would be open to working with architects and devel- opers to ensure the development is compatible with the neighborhood while remaining cost-effective, thus paving the way for more middle- income housing. Allowing for an economically diverse senior housing development will create mixed-income com- munities for working-class seniors without being cost burdened. Placing a premium on location and paring down amenities that are outdated and underutilized will drive this eco- nomic diversification and create an environment for the higher-income residents to subsidize the lower- income residents. Suppose these developments can be replicated at an affordable rate and be relevant to those who need them. In that case, senior living has a legitimate need to protect housing affordability for 15 million seniors. We need to ease regulations for economic diversity, allowing cost-effective architectural and development standards. From the financing/capital stack to site acquisition, hard costs and soft costs as well as furniture, fixtures and equipment, all components of development should be analyzed as opposed to trying to solve problems based on prior assumptions or what developers “think they know.” Reduc- ing scale should be a critical focus to lowering costs; developing fewer units on smaller sites decreases non- revenue-generating, amenity-rich/ common area spaces. While these are all components of lower costs, change ultimately starts at the local level. Planning commissions and city planners need to be open to discus- sions that impact all associated costs of senior housing development. Col- laboration from these policymakers, commercial real estate developers and their investors will be required to identify regulations that involve the enforcement of upper-class standards of quality on the develop- ment of working-class and middle- income senior housing. s jthomas@ba.org The growing need for affordability in senior housing NATIONAL REACH, LOCAL RESULTS. 303-657-9700 BrinkmannConstructors.com Joshua Thomas Vice president of strategy and development, Bethesda Senior Living Communities Bethesda Senior Living Communities Senior living communities with simple architectural themes allow for scalable products at an affordable price.