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Why Senior Housing

The Resilience of Senior Housing as an Asset Class and American Essential Service



In the world of real estate investments, few asset classes have shown the remarkable resilience that senior living has traditionally demonstrated, especially during economic downturns. While other historically recession resilient asset classes, such as self storage, rely much more on the average American consumer, senior housing’s target demographic holds a disproportionate share of wealth(1). This is none other than the baby boomer generation, the first of whom are turning 77 this year. Alongside an increasing demand for quality care, the future of senior housing expects unprecedented growth as an investment class and American essential service.



Looking Ahead: Baby Boomers Reshaping Senior Living


The baby boomer generation, born between 1946 and 1964, represents a demographic wave that has had a profound impact on various sectors of society. “You didn’t need to enter six-figure debt to earn a college degree,” says Jack Kelly of Forbes(2). Baby boomers were also able to acquire their primary residence and any additional real estate for far less than today’s market prices. Today, much of that real estate has, in turn, been sold for high profits and consequently increased their net worth. These are just a couple reasons that exemplify the high value placed on the target demographic, and ultimately, the tenants of senior housing communities today.


While the baby boomer generation is certainly one of the wealthiest(3), they are

also one of the longest living generations to date, as well as the second largest generation. “Right now, approximately 45 million Americans are 65 or older. By 2030, that number will reach 73 million Americans.”(4) As baby boomers enter their retirement years, there’s an unprecedented surge in demand for senior living communities. This demographic momentum provides a steady influx of potential residents, making senior living facilities less susceptible to economic downturns.



Senior Housing Market Overview


In Q2 of 2023, senior living saw a 5.7% increase in annual rent growth, with majority assisted

living properties accelerating at an all-time high(5). This is because increases are tied directly to the costs of providing healthcare services and amenities to residents. This practice ensures that senior living communities can continue to provide high quality care and services to their residents while maintaining the financial health of the entire property, despite widespread economic inflation.(6)


In contrast to nations with government healthcare programs which include long term care and housing for seniors, such as Germany, or nations who maintain a more collectivist culture, the individualistic approach of the American healthcare system has led to a new normalcy when it comes to end-of-life care. This usually includes entering into a long-term care community, primarily through senior housing. This sentiment was further exemplified during COVID-19. As Ferguson of NAIOP says, “Many families discovered they could not take care of their elderly family members and their children while everyone was home at the same time.”(7)



To Conclude


Senior housing has become an essential service in America. These services cater to the unique needs of an aging population, most of whom are considered baby boomers, a highly desirable demographic in America. Together, they have reshaped the economy and the expectation of care as they age. Regardless of economic conditions, the need for these services remains consistent. Senior housing properties can weather the storm of a recession, even a global pandemic, because ultimately, seniors will need the care and are willing and able to pace inflation in order to meet their demands and expectations.


SOURCES:

1 Lu, Marcus. Visualizing $156 Trillion in U.S. Assets, by Generation. Visualist Capital. (17 August 2023.) https://www.visualcapitalist.com/us-wealth-by generation/#:~:text=The%20distribution%20of%20wealth%20is,21%25%20of%20the%20country’s%20population.

2 Kelly, Jack. The Great Wealth Transfer From Baby Boomers To Millennials Will Impact The Job Market And Economy. Forbes. (9 August 2023.) https://www.forbes.com/sites/jackkelly/2023/08/09/the-great-wealth-transfer-from-baby-boomers-to-millennials-will-impact-the-job-market-and-economy/?sh=416fc8d83e4a

3 Board of Governors of the Federal Reserve System. (2 October 2023). https://www.federalreserve.gov/releases/z1/dataviz/dfa/compare/chart/#quarter:135;series:Assets;demographic:generation;population:all;units:levels

4 Livable Communities Are Age-Friendly. AARP. https://www.aarp.org/livable-communities/about/#:~:text=Approximately%2045%20million%20Americans%20are,older%20adults%20than%20of%20children. Accessed on 23 September 2023.

5 Bowers, Lois A. Senior living occupancy increases again but still lags pre-COVID levels. McKnights Senior Living. (7 July 2023.)

https://www.mcknightsseniorliving.com/home/news/senior-living-occupancy-increases-again-but-still-lags-pre-covid-levels/

6 Senior Living Costs: What’s Behind the Increase?. NIC Map Vision. (10 May 2023.) https://www.nicmapvision.com/blog/senior-living-costs-whats-behind-the-increase/

7 Ferguson, Julie. The Senior Living Sector is Poised for Growth. NAIOP. (2021.) https://www.naiop.org/research-and-publications/magazine/2021/fall-2021/business-trends/the-senior-living-sector-is-poised-for-growth/


DISCLOSURES:

For more information on Emerson Equity, please visit FINRA’s BrokerCheck website. You can also download a copy of Emerson Equity’s Customer Relationship Summary to learn more about their role and services.


Important Disclosure


The contents of this communication: (i) do not constitute an offer of securities or a solicitation of an offer to buy securities, (ii) offers can be made only by the confidential Private Placement Memorandum (the “PPM”) which is available upon request, (iii) do not and cannot replace the PPM and is qualified in its entirety by the PPM, and (iv) may not be relied upon in making an investment decision related to any investment offering by the issuer, or any affiliate, or partner thereof (“Issuer”). All potential investors must read the PPM and no person may invest without acknowledging receipt and complete review of the PPM. With respect to any “targeted” goals and performance levels outlined herein, these do not constitute a promise of performance, nor is there any assurance that the investment objectives of any program will be attained. All investments carry the risk of loss of some or all of the principal invested. These “targeted” factors are based upon reasonable assumptions more fully outlined in the Offering Documents/ PPM for the respective offering. Consult the PPM for investment conditions, risk factors, minimum requirements, fees and expenses and other pertinent information with respect to any investment. These investment opportunities have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption therefrom and from applicable state securities laws. All offerings are intended only for accredited investors unless otherwise specified. Past performance are no guarantee of future results. All information is subject to change. You should always consult a tax professional prior to investing. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by Issuer, or one of its partner/issuers. Issuer does not warrant the accuracy or completeness of the information contained herein. Thank you for your cooperation.


Securities through Emerson Equity LLC Member: FINRA/SIPC. Only available in states where Emerson Equity LLC is registered. Emerson Equity LLC is not affiliated with any other entities identified in this communication.


Real Estate Risk Disclosure:


• There is no guarantee that any strategy will be successful or achieve investment objectives including, among other things, profits, distributions, tax benefits, exit strategy, etc.;

• Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;

• Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;

• Potential for foreclosure – All financed real estate investments have potential for foreclosure;

• Illiquidity – These assets are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.

• Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;

• Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits

• Stated tax benefits – Any stated tax benefits are not guaranteed and are subject to changes in the tax code. Speak to your tax professional prior to investing.



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