Why Senior Housing Faces A Supply And Affordability Crisis

Every day, 10,000 Americans turn 80 years old, according to Senior Housing Business, a trade publication. And this won’t slow down anytime soon. The number of Americans older than 65 is expected to grow from more than 60 million in the 2020s to 82 million by 2050, a nearly 50 percent increase, according to the Population Reference Bureau. 

Long forecasted due to the post-World World II baby boom — when America’s birth rate doubled between 1941 and 1964 — the demographic shift that has been defined by turns as “The Silver Tsunami” or “The Gray Wave” is finally reaching shore and won’t abate for decades. 

“Baby boomers aging is a very real development,” said David Balow, executive vice president at Senior Living Investment Brokerage. “It’s something that’s been anticipated for many years, but it’s finally here now and it’s only getting stronger.” 

Not only will every single one of these 82 million Americans expect to have housing, but due to their age, this housing must encompass a variety of senior living assets and utilities: active adult communities, independent living complexes, assisted living, memory care for those with dementia, and skilled nursing homes, including for end-of-life care. 

Unfortunately, due to a confluence of factors, there simply aren’t enough senior living facilities in America available or prepared to house the baby boom generation. 

“We’re woefully unprepared with an insufficient supply of senior living options,” said Lizbeth Heyer, president of 2Life Communities, a Massachusetts senior living nonprofit. “The question for senior living is whether there is enough and can people out there afford it, and the bottom line is most senior living is built for the very wealthy and is not applicable for the vast majority of this country.” 

By 2030, to keep pace with demand, America needs 700,000 new senior housing units (roughly 140,000 per year), but the country is producing only 24,000 per year. In fact, the record year of production occurred back in 2017, when 56,000 new units were delivered, according to Cushman & Wakefield.  

“We’ve had 17 straight quarters of occupancy growth, and the number of occupied units is higher than they’ve ever been,” said Zach Bowyer, head of living sectors at C&W, who added that for every unit delivered to the national market, there’s up to three units being occupied. 

“Those numbers suggest that starting today, to meet peak demand levels, we need to deliver an additional 45,000 to 55,000 units per year,” he said. “And where new construction starts are today, we’re on pace to deliver only 8,000 units. It’s insane.” 

The culprits for this disconnect, as usual in commercial real estate, are high interest rates and a cost of capital that just won’t add up. Since the Federal Reserve instituted its higher-for-longer regime in 2022, and brought the overnight federal funds rate to a 15-year high, construction financing across asset classes has ground to a standstill, particularly in senior housing, as shown by the dismal new delivery totals.

Even worse, as tariffs, inflation and trillion-dollar federal deficits hammer bond yields, the reality of 10-year Treasury and 30-year Treasury eventually holding firm at a 5 percent (or higher) forward curve is likely to keep long-term debt financing capital costs higher for longer as well.  

“While it was difficult to make things pencil from a development standpoint in 2019, today it’s virtually impossible,” said Matthew Gourmand, president of Omega Healthcare Investors, a real estate investment trust with an $11 billion market capitalization. “We can’t see many development deals being done today that make sense, from my perspective.” 

And, yet, by nature of the law of supply and demand, what seems bad for the average American consumer — higher rents and general unaffordability — is actually great for investors and the capital markets players holding senior housing facilities within their portfolios. 

Cui bono?

To hear it from Bert Crouch, head of North America at Invesco Real Estate, there’s no asset class more popular with CRE investors in 2025 than senior living. 

“Belle of the ball, baby,” said Crouch. “It’s the best REIT sector by a mile. Why? Because the demographics are there.” 

So are the metrics. In 2024, health care REITs increased their performance by 24 percent year-over-year, and this year health care is up an additional 8 percent — and is the second-best performing sector in public REITs after cellphone towers, according to John Worth, executive vice president for research at the National Association of Real Estate Investment Trusts.

“COVID saw occupancy declines, but health care REITs came into that period with strong operating performance and healthy balance sheets, so they could perform through that difficult period, and have now emerged into really positive supply and demand conditions,” said Worth.  

Jim Dooley, senior director of JLL’s seniors housing capital markets group, described the senior living space as “an excellent investment opportunity” from the perspective of capital providers, REITs and private equity players. 

“A lot of new capital is very intrigued [by the space],” said Dooley. “The demand is probably at an all-time high now, and it’s only going to continue for many years.”

In 2024, senior housing — which includes assisted living, memory care and continuing care retirement homes — posted $5.5 billion in property sales, and its fourth-quarter property sales of $1.9 billion were the strongest volume since 2021, according to CoStar. At least 27 transactions last year exceeded $50 million. 

“There was a huge recovery, and when you look at Q1 of 2025, compared to Q1 of 2024, you saw a doubling of investment activity,” said Chad Littell, CoStar national director of capital markets analytics. Littell noted that $1.3 billion in senior living assets traded hands in the first quarter of 2025, compared to $637 million in that same period of 2024. 

“Investors are looking for oversupply, and certain markets with multifamily have had too much supply, so if investors want any exposure to residential communities, health care is a great way to play into that because you know demand is there through the huge demographic shift,” he added.

And, while Dave Sedgwick, president and CEO of CareTrust REIT, a health care REIT with a $5.4 billion market cap, acknowledged that “demographics are destiny” and that senior living will be “an incredibly attractive sector” to be positioned in for decades to come, he admitted the supply question is also a major problem for the industry to consider. That’s particularly true in the skilled nursing home space.  

“The skilled nursing setting is where you’ve seen, over the last 10 years, a gradual but consistent decline in supply,” said Sedgwick. “Which is madness when you think about, as a society, preparing for a huge onslaught of demand for skilled senior services.”  

JLL’s Dooley noted that much of the billions of dollars of capital that entered the space in the last 18 months went toward acquisitions, not new development. 

“As long as there’s an ability to acquire at an attractive basis and attractive yield, you won’t put that capital to new development,” said Dooley. “There’s a very limited subset of the market that’s developing, and I think they will benefit in 2027, when they deliver the newest product.” 

So, if no one is building, what exactly is being done about the alarming supply picture? 

Fear and loathing

When you listen to those who know senior living best, it’s no surprise the industry has become highly financialized and privatized into the capital markets system — it’s a necessary evolution. 

As recently as the mid-20th century, Americans took care of their elderly parents and grandparents inside their own homes. But as time went on, elderly facilities run by Catholic nuns or state-managed psychiatric wards took on an increased share of the burden of caring for aging Americans. 

All that changed in 1964 with the passage of Medicare and Medicaid under President Lyndon Johnson’s Great Society initiative. Those programs allowed for nursing homes to be proprietary properties, owned by private firms, rather than just welfare facilities run by nuns or state-sponsored nursing groups.   

According to Moishe Gubin, CEO of Strawberry Fields, a REIT that specializes in skilled nursing facilities, since the turn of the century, private ownership has taken on a greater share of the operation pie and is only growing its scope and reach. 

“Up until 20 years ago, you had one-third of Americans taken care of by nuns or nonprofits, one-third [of senior living facilities] were run by mom-and-pops, and you had one-third that were corporate owned and operated,” said Gubin. “But, because of the size and expense of the business, you need deeper pockets. It’s turned into something where the government has gotten out.”

Today, senior housing is largely dominated by REITs — landlords who own buildings and lease the operations under triple-net leases out to corporate operators. Names like Welltower and Ventas dominate most states, while smaller players like Sabra Healthcare REIT, National Health Investors (NHI), CareTrust and Omega also capture market share. 

Even with the power of their market capitalization, the REITs are now hard pressed to improve supply, and it’s not just due to high interest rates. There’s still a hangover from COVID-19. 

The University of Minnesota found that, as of April 2023, Americans older than 65 made up 63 percent of all COVID-related hospitalizations and almost 90 percent of deaths associated with the virus. 

“COVID was a big disruption. That put a bunch of development on hold and messed up a lot of current operations,” said Balow. “Many projects were planned between 2015 and 2020, with people buying land and getting approvals. But now with debt markets where they are, and construction costs being expensive, it’s resulted in a lot of development projects not penciling out.” 

But Gubin argues the supply picture is actually better than it appears and that many of the biggest problems when it comes to senior living supply are localized to the largest cities and metropolitan regions in the country like New York, Chicago, Miami and Los Angeles.

He added that more rural communities have plenty of empty beds for seniors due to an overbuilding pattern rooted in the 1960s to 1980s. 

“If your mother needed a nursing home, the thinking was you shouldn’t have to put her 50 miles away, so they basically built in almost every county in America, so there’s a lot of capacity in certain states,” said Gubin. “But a lot of nursing homes in the bigger city areas are 100 percent occupied.”

One of the reasons the supply of skilled nursing facilities has declined across America’s largest cities is the concept of a certificate of need. Essentially, operators and landlords must secure a state license, or certificate of need, that shows the skilled nursing beds are required in that particular county — which states are loath to grant due to the budgetary expenses associated with an increased access to care. 

“States and other operators in the area are not exactly motivated today to bring new facilities online if the overall occupancy, as a country, is around low 80 percent for skilled nursing,” said CareTrust’s Sedgwick. “So it becomes difficult to prove a need ahead of time, before it’s essentially too late.”

Running out of time

Slowly, but surely, the U.S. is entering the “too late” twilight zone. 

It is this looming supply challenge that is simultaneously creating an affordability crisis for seniors, many of whom are turning 80 years old today but have been out of the workforce since retiring in the late 2000s or early 2010s. 

“Over the next 20 years, not only will you see continued push forward of demand relative to supply, you’re also going to see a decline in people’s capacity to pay,” said Gourmand, who noted that many retirement plans can’t cover senior living expenses, which include medicine and home care. “As the aging population begins to cycle through the defined benefit generation to the defined contribution generation, the capacity of people able to pay will likely diminish.”

2Life’s Heyer emphasized that nearly 70 percent of older adults in Massachusetts have incomes below $60,000 per year, hold less than $50,000 in savings, and that a vast majority of pensions in our society have disappeared for employees outside of government work. At the same time, the monthly drawdown of Social Security can only pay for a fraction of most senior housing rents, which average $65,000 per year in Massachusetts.  

“It’s expensive to live, and the reality is the vast majority of adults retire without savings and go from working households to falling into poverty because they live on Social Security alone,” said Heyer. “We’re facing a crisis in this country, where the vast majority of people are aging in places they can’t afford.”

A June 2025 survey from CBRE found that 56 percent of investors anticipate rental rate increases of 3 percent or more across various senior housing classes in the next 12 months.

Danielle Palmisano, chief program officer of residential-based services at JASA, a nonprofit that provides aging services to 40,000 New Yorkers annually, argued that cities like New York face the dire prospect of a significant growth of senior homelessness due to a lack of available units and widespread unaffordability. She noted that New York City averages 69 applications for every one affordable housing unit that comes on the market for seniors. 

“We don’t have enough investment on the community side to support aging in place and be responsive to the continuum needs that happen,” Palmisano said, emphasizing that older U.S. adults are expected to pay for their housing, medicines and home care services out of pocket. “When you don’t have an affordable housing unit, it’s impossible to manage that.”

Strawberry Fields’ Gubin defended the state of senior living and argued that consumer choices remain robust, as there is usually some kind of government subsidy for seniors to pay for various needs: Every state offers Medicaid waiver programs to help pay for assisted living as well as support for some home-based care services, while nursing homes and short-term hospital stays are aided by Medicare and Medicaid subsidies, when applicable. However, he offered the caveat that these services vary state by state.  

“Federal law made the nursing home business a privatized business to take care of the social needs in the country,” he said. “From that point of view, some states do a better job of following the law and reimbursing with a cost factor, and others do a worse job and are always playing catch-up.”

Lisa McCracken leads research and analytics at the National Investment Center for Seniors Housing & Care. McCracken acknowledged the enormous supply shortfall across the country, but noted that instead of mass senior homelessness, the demographic will just experience less choice in the type of services it can expect to receive as it ages.  

“Will we have homelessness? No, but we will have more seniors that will struggle to tap into the level of services needed to successfully age in their home,” she said. 

What concerns McCracken more than anything is the fact that 20 percent of seniors have no children and that 40 percent of national divorces are from those 55 years or older. “If someone does age in place, they need support. Their safety net is often a family caregiver,” she said. “I think we need to come up with some different models.” 

Some of these new models include a combination of new technology and good, old-fashioned CRE asset repositioning. 

Aaron Becker, head of seniors housing and health care production at Lument, a CRE capital provider, said that one of the ways the industry is addressing the middle-market supply decline is by reconfiguring senior housing assets built in the 1990s. These might not be very attractive to the higher end of the market, but such facilities need only a bit of investment capital to stay viable for decades to come. 

Becker also suggested saving Medicare and Medicaid costs by putting two seniors in a room in many facilities. 

“The one thing offsetting the risk is people are entering facilities at a much later age than they used to,” he added. “Baby boomers were more active in their lifestyle, they’re not entering assisted living till much later in life, so there may be a little time to catch up.”

Erin Caswell, chief operating officer at Revel Communities, owner of 13 U.S. independent living communities, agreed that seniors on a whole are becoming healthier and utilizing more support services in their independent living communities or in their own homes, putting off the need to move into more expensive skilled nursing or nursing homes until later. Moreover, she pointed out that AI technology is partnering with fall prevention and machine learning to reimagine how seniors are monitored and how operators can optimize the schedules of their caregivers. 

“There’s great technology and services out there and people are living longer,” she said. “I think it’s exciting. There’s a lot of opportunity for us.”

But no matter how rosy the technology outlook is, or what CRE can do on an innovation front, at the end of the day, senior living construction must once again begin making sense from a capital markets standpoint for the nation to come anywhere close to addressing the supply shortfall that is already a clear and present danger — to say nothing of an already obvious affordability crisis.  

“Not only are we not having enough supply to meet middle-market needs and demand, but the majority isn’t going to be able to afford it,” said Cushman’s Bowyer. “You can figure out the sticks and bricks side to house people, but you also need to properly take care of people at a cost that’s affordable to them.” 

Brian Pascus can be reached at bpascus@commercialobserver.com