CREJ - Healthcare Properties - July 2017
American Family Financial statistics show that nearly 40 percent of people today are not saving or have saved too little for retirement. The average American started his retirement savings too late, those between ages of 55 and 64 have acquired on average $104,000 in retirement savings. This equates to monthly investment income of about $300 a month, according to Investopedia. What will the average American do when they decide to retire? Today’s senior independent living communities, especially those constructed during the recent senior living construction boom, cater to the affluent, the top 15 percent. As providers, we have continued to create more elaborate environments to meet higher market expectations of higher income seniors. We have focused on interior design, which offers hotel-like appearances and services, dining experiences that feature multiple venues and made-to-order, chef-prepared menu choices, better health and wellness facilities, and larger units. On the other end of the income spectrum, government-based assistance in the form of tax credits and Medicaid provides for the bottom 20 percent of the market. So, how do we provide for the middle market, the nearly 65 percent of the middle-income market, who have been denied access to senior housing because they earn either too little or too much for current models of senior housing? While the mixed-income approach to senior living has had limited success, the issue remains: How do we solve the middle-income senior living market crisis? How do we, as providers and designers, address this issue to create a new model for the largest population in the senior generations? •Construction cost. The cost of construction remains one of the main influencers in the price seniors pay for their housing. These construction costs continue to rise, nearly 4.5 percent per year for the last four years, according to Turner Construction building cost index. The cost of living continues to rise, yet the income for a middle-income senior cannot keep up. The delta between high- and low-end senior living communities contains only a 20 percent construction cost variance between them, based on a recent publication by Weitz Construction. While reducing construction cost is one answer, it does not go far enough in creating senior housing for the middle-income market, but perhaps it is one of the ingredients in the magic formula. • Location, location, location. The current and next generations want to be centrally located and part of the action. There are proven, positive effects for seniors living near transit hubs. AARP has promoted transit-oriented living since 2012. With cities like Denver, Seattle and Minneapolis developing their transportation systems, population and density continue to grow around new transit hubs. Convenience to restaurants, medical services and other community amenities could reduce the need for providers to offer these services and thereby reduce the cost of living in these senior communities. Rose Villa in Portland, Oregon, has created its own town concept, allowing both residents and the outside community to coexist on the same streetscape. Utilization of the community infrastructure adds revenue to the community and lowers the cost to the senior residents. • Tiny house. One significant way to lower the cost of construction is to build less square footage. The range of independent living apartments in a senior campus today averages around 1,200 square feet. Perhaps IKEA and HGTV’s Tiny House Nation have it figured out – pack more function into less space. Increased flexibility within a unit, multiple functioning rooms or efficiency-rated suites, ranging from 750 to 1,000 sf could net an average of a 300-sf reduction per unit, thereby allowing greater density within the building, which would lower construction costs and monthly rents. • App lifestyle. With so much technology at our fingertips, one can rent a house in the mountains for a weekend or request a ride, anywhere. Companies like Blue Apron offer a perfectly portioned and healthy meal delivered to one’s door. One can have an unlimited variety of goods delivered in less than two hours (thank you Amazon Prime Now!). Imagine the possibilities, food service for an entire senior community, allowing each to order all of their meals from an app. As found at some schools, local restaurants and merchants can prepare meals in the morning and deliver them on the same day. Utilization of transportation systems could reduce some overhead. Buses, for example, could take large groups of seniors shopping instead of operators purchasing a community bus and the cost of a full-time equivalent. Building on the ideas of companies like Uber, Air BNB, Blue Apron and Amazon for a senior community, we can break the standard models of service by outsourcing and connecting independent living senior to the greater city. Upcoming generations of seniors will be well versed with this style of living. Fewer full-time employees will be required because of these outsourced services, thereby lowering operational costs and living expenses. • Multigenerational experiences. Surveys in America show each new generation of seniors has less desire to be segregated. It is time to break down generational barriers. Encouraging college students to live with independent living residents allows them to share in the costs of living and to take care of some of the residents’ needs, such as cooking, cleaning and transportation. Integration of adult daycare and child daycare provides benefits to staff, seniors and children who can be co-engaged in daily activities. Can these be programmed into senior living to lower operational costs? • The challenge. We in America are the most creative, innovative and entrepreneurial society on earth. When there is a demand, our free enterprise system will satisfy that demand. It will only happen if we focus on the enormity of the need, and invent new environments and living solutions that are responsive to retirement economics in America for all seniors. We must create new models for the middle-market senior; new models that are groundbreaking in all aspects of location, building design, technology and operations.