Senior Living More Tariff-resistant Than Other Real Estate, Immigration Remains Big Issue

The senior living industry could be “more durable” than some of its real estate counterparts in the years to come with regard to tariffs, while immigration is a bigger, longer-term issue.

The impact of tariffs on the senior living industry, along with potential impacts including proposed cuts to Medicare and Medicaid and ongoing deportations, have both created uncertainty in the minds of senior living leadership teams since President Donald Trump won office last November.

Earlier this year, the administration enacted a range of tariffs that ranged from 10% to 46%, spanning trading partners including Canada, China, Taiwan, Thailand, United Kingdom and Vietnam.

According to Martin Atkin, who is senior investor director at private wealth management company Bernstein, the current administration is wielding tariffs in an “unusual” way compared to history, given that they are “exceedingly broad” and levied against a wide range of countries.

But whether these tariffs severely impact the senior living industry remains to be seen as operators weigh political rhetoric and react to policy decisions.

Despite the impact of tariffs and potential disruptions in staffing and labor costs, the senior living industry still has a runway of demand ahead of it that should create many new opportunities, according to NIC Head of Research and Analytics Lisa McCracken.

Senior living outlook ‘not meaningfully different’

Despite potential disruption of tariffs imposed by Trump, Green Street Managing Director John Pawlowski said the real estate analysis and research firm’s current outlook on senior housing is “not meaningfully different.”

Green Street believes operators will hit mid-90th percentile occupancy rates and that revenue per occupied room growth will remain above the rate of inflation.

“Expenses could be more challenged in the current environment, but when you put it together with the operating leverage in the business, you’re looking at low double-digit stabilized, same-store NOI growth over the next five years,” Pawlowski said.

That reflects a rosier outlook than any of the other property sectors tracked by Green Street.

With the rate of newly constructed communities limited, Green Street expects positive occupancy improvement and strong pricing power. Future risks include labor availability due to immigration-related changes and changes to labor costs.

“There’s an interesting dynamic where labor costs might cool pretty quickly the next 12 to 24 months, but when you stare out, you’re just going to run into availability of body issues in the labor market,” Pawlowski said. “In aggregate, senior housing forecasts haven’t really changed all that much because you have the benefit of lower supply.”

As one looks up the continuum, Pawlowski sees assisted living and memory care, both need-driven products, in a “low-risk bucket” compared to other real estate sectors, if the U.S. economy slips into a recession.

Policy changes hurting job growth and a slowdown in the housing market could impact the velocity of move-ins for standalone active adult and IL properties, while also not “massively lowering” the industry’s future outlook, Pawlowski said.

“We don’t see huge housing market sensitivities coming through the senior housing occupancy gains in certain markets yet, but we’re watching it carefully,” Pawlowski said.

Immigration reform a ‘bigger impact’ on senior living

While the senior living industry is not as susceptible to disruptions caused by tariffs as other industries, it still faces a challenge in the form of immigration labor availability, both in operations and in construction.

The Trump administration has taken a hard line on deportations of immigrants, in the process garnering legal challenges and drawing ire from judges. Although senior living operators often say they don’t employ undocumented workers at risk of deportation, they have long thought of immigration reform as a long-term boon for the senior living workforce and a crucial source of labor.

Immigration-fueled labor challenges could put “downward pressure” on supply forecasts for all real estate sectors, not just senior housing. Green Street anticipates 1% annual supply growth for the next three years in senior housing with a “sharper re-acceleration” towards the end of the decade, Pawlowski said.

McCracken shared hearing from senior living developers who said half of construction labor comes from immigrant workers, noting that the industry must get “smarter and more efficient” to spur future development once conditions materially improve.

“If that segment of the workforce disappears when we really already are close to full employment in the United States, then that leads to wage cost escalation and so that could lead to additional stresses when we look at housing generally,” Atkin said.

With development muted, capital partners and investors can look internally for new acquisitions to deploy capital, and Atkin added that as long as debt lending conditions remain the same, senior housing should continue to see attractive investment opportunities continue. This comes off of a record year of publicly-announced transactions in senior living.

But as interest rates continue to fluctuate, Pawlowski said conditions on underwriting deals would be “very difficult” and that the dislocation of values will become more pronounced.

“I think there’ll be enough capital to be put to work in senior housing that we will be okay on the transaction market,” Pawlowski said.

As the U.S. and Canada trade tariffs, Green Street has observed Canadian companies pausing U.S.-based investments as uncertainty creeps in.

While “on the margin” and not representative of a wholesale market shift, Pawlowski said investors have had greater interest in putting their dollars toward deals in Europe, Asia and Australia compared to the U.S.

“The markets underwriting just a little less credibility in the U.S. right now, and so it’s impacting debt markets, and will be starting to impact capital flows, but it’s still too early to really draw a firm verdict on where it goes from here,” Pawlowski said.

Looking ahead, Pawlowski urged those seeking to make future senior living investments to carefully monitor their deal underwriting in certain markets based on housing price trends and migration patterns.

“The outcome of the investments often dictate the price,” he said. “So just be careful with your cost basis and the leverage you use on the property.”

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