More Boomers Can Afford Senior Living, But Development Shortfall Threatens ‘severe Shortage’ Ahead

NIC MAP CEO Arick Morton has good news and bad news for the senior living industry.

The good news is that baby boomers are now the wealthiest generation of Americans by way of median net worth. That will boost their ability to afford senior living communities, even as the middle-market challenge and opportunity remains.

The bad news is that the current lack of senior living development could hinder the industry’s ability to meet future demand, even if there are residents willing and able to pay for it. Morton noted during a webinar on Thursday that the shortfall in new development could bring regulatory oversight and negative mainstream media coverage to the sector. The industry is delivering approximately 26,000 new units annually, and the sector needs to develop nearly double the all-time record pace of 55,000 units per year to meet future demand, Morton added.

As it stands today, the senior living sector faces a potential shortfall of approximately 595,000 units by 2030, and at a replacement cost of approximately $450,000 per unit, that implies a $275 billion investment gap, NIC MAP data show. While leasing remains strong, the industry is not “seeing the building we’d expect,” he added.

“We’re staring down a deficit that will require either a generational shift in capital allocation, or a severe shortage of senior housing when the boomers arrive,” Morton said.

If the industry fails to meet future demand with new development, it could prevent the sector from reaching 90% occupancy on a national level, a long-discussed benchmark of industry stabilization. That could mean fewer new units and more aging properties, accelerating obsolescence.

“We’ll either see price spikes or people aging in place by default,” Morton said.

Morton said the industry must look at “vertical expansion” to grow along with repositioning older assets and partnering with health systems that are “sitting on entitled land” for future, incremental development. In 2025 senior living demand is a tailwind for the first time in decades, but lenders still aren’t doling out capital for new projects despite momentum in senior housing M&A.

But, looking ahead, Morton remains optimistic about the industry’s prospects, noting that the industry is in the beginning of a “20-year demographic tailwind.”

“We’re entering the steepest part of the curve now,” Morton said.

The median 75-plus household today can afford approximately 50 years of senior living private pay rent, up from 15 to 20 years in the early 2010s. That is based on U.S. Census wealth and income distribution and senior living rent data at private-pay communities.

Today, the median senior housing rent is approximately $66,000 annually, but the baby boomer generation that is just starting to enter the senior living market has increased its median net worth to $335,600 for those 75 and older, according to Fidelity Investments. Even with inflation-adjusted annual rents increasing approximately 8% in the last 10 years, median income of those 75 and older has increased between 30% and 35% and net worth has increased approximately 40%.

“The increase in wealth more than offsets the increase in rent,” Morton said. He attributed the broader increase in older adult wealth partly to wealth transfers from past generations to the boomers, a consistently active housing market and the rise of more dual-income retirees.

Morton cautioned that the senior living industry still is struggling to create products affordable to older adults on the lower end of the middle-market income spectrum, as evidenced by past research regarding the “Forgotten Middle” cohort. Older adults with no home equity or long-term care insurance will likely still struggle to pay for senior living as it is priced today, Morton noted.

“We can’t just raise prices endlessly,” Morton said. “Even if penetration increases, affordability limits are very real for about a third of the population.”

Market segmentation by way of clearly defining luxury, middle-market and affordable housing models to meet broader housing needs as the U.S. population ages is an important step to improving affordability for all seniors, not just the median-income cohort, Morton said.

The senior living penetration rate has fully recovered since its 2020 lows, showing signs of “exceeding” levels last reported in 2019, Morton noted. While this could signal catching up demand, Morton said an improved penetration rate shows a fundamental shift in how older adults aged 80 years old and older are spending and entering senior living.

“People assumed this was a bounce-back, but it’s more than that, it’s an acceleration,” Morton said.

Morton has this confidence because of the baby boomers who are more willing and able to move into senior housing than past generations, despite the growing number of senior living operators taking steps to meet residents outside of a community setting.

In the first quarter of this year, the senior living industry absorbed over 6,300 units, the highest since NIC started tracking the metric in 2006, Morton said. That marks a 20% increase from the same timeframe last year and more than double the pre-pandemic average.

“It took [senior living] five quarters post-Covid-19 vaccine to regain demand losses, that’s extraordinary,” Morton said.

Occupancy continues to climb nationally, with some markets already reporting 90% census, with the industry reporting 87.4% average occupancy nationwide across 31 NIC MAP primary markets as of mid-April of this year.

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