As Pressure for Senior Housing Builds, Resources Don’t Keep Pace

15 min read

“The unprecedented growth of the nation’s older population presents a host of housing challenges. Within the next decade, some 18 million adults will be in their 80s – many living alone and on limited incomes. The need for affordable, accessible housing and in-home supportive services is therefore set to soar.”

This is the outlook presented by the latest edition of Harvard University’s Joint Center for Housing Studies report, entitled, Housing America’s Older Adults 2019. And it represents one of the greatest challenges facing the entire affordable housing enterprise. The first question, then, in any discussion of senior housing and services is: Are we meeting the demand?

“Absolutely not!” declares Beth Burnham Mace, chief economist and director of outreach for the National Investment Center for Seniors Housing & Care (NIC), headquartered in Annapolis, MD. “We use the term, ‘the forgotten middle,’ which means seniors with too much to qualify for support but not enough to pay for the housing and care they need, at least for very long; roughly $45,000 of income per year from all sources excluding home equity. NIC commissioned a study last year with NORC at the University of Chicago, defining middle-income seniors in terms of demographics, income, housing and healthcare needs. We found that the forgotten middle cohort will potentially exhaust its own savings and resources and threaten Medicaid’s long-term sustainability if action is not taken to provide affordable care and housing solutions to this group of individuals. We demonstrated that the need is huge. While the study occurred prior to  Covid-19, in  my opinion, the pandemic has only exacerbated this need. The study found that 54 percent of this swelling cohort of 14 million Americans over the age of 75 in the year 2029 would not be able to afford today’s senior housing options, 60 percent would have some type of mobility limitations likely requiring at least a minimum of retrofitting [of their residential home environments], and about 20 percent had one or more comorbidities or issues, as well as an activity of daily living (ADL).” It is notable that the study’s time frame ended in 2029 when the crush of Baby Boomers becoming likely candidates for senior housing is just beginning. Expect an even greater surge in need and demand from that point on. Even for those who do qualify for some subsidy or support, there is general agreement that the need far exceeds the available resources.

“The scary thing about this is the number of seniors who are unable to live independently will grow exponentially over the next two decades,” says Laurie Goodman, vice president, housing finance policy for Washington, DC’s Urban Institute. “And the biggest group, the Baby Boomers, are going to create a demand we have never seen before. I don’t think we’re thinking enough about this at all. The pandemic has compounded the problem of a huge increase in the number of people who will need [affordable senior housing and care], as facilities will need to allow for lower density,” she agrees, “and it’s a systemic issue in that it has changed the economics of these facilities and the aftereffects are that people will think twice about building more senior housing.”

Housing is Healthcare/Healthcare is Housing
“We have challenges on a couple of levels,” says Sharon Wilson Géno, executive vice president, national services and chief operating officer of Volunteers of America of Alexandria, VA, a nonprofit ministry whose purview includes housing and healthcare and touches the lives of 1.5 million Americans in more than 400 communities. “There is the sheer number of units we need. The population is aging and they’re living longer. The cost of sustaining them is not supported by Social Security and other safety net programs.”

But where Wilson Géno is most insistent is on the interrelationship between senior housing and health. “The data is clear,” she states. “Housing is healthcare. And if we are going to understand funding healthcare, we have to understand how to evaluate the least expensive and most cost-effective strategies, as well as the best from a well-being outcome perspective.”

Among the thorniest problems in affordable senior housing has been the separation of the housing and healthcare silos, even though so many industry professionals, like Wilson Géno insist upon the interrelationship as providing the most favorable outcomes. “It’s a function of appropriations,” she explains. “Each one has a different political constituency.” Traditionally, there has been a distinct bureaucratic hesitancy for HUD and the Department of Health and Human Services’ Centers for Medicare and Medicaid Services (CMS) to blend their funding into one effort to keep vulnerable seniors both healthy and housing secure.

“There is a HUD bill that would provide a little more money for service coordinator opportunities,” Wilson Géno says. “From a historical perspective, you can understand why healthcare people would not want their funding siphoned off for housing. But the world has changed, and COVID is an accelerant of what was already happening. It put a spotlight on it and lit the fire.”

What COVID-19 Has Wrought
Matthew Rule is senior vice president of housing development for National Church Residences in Columbus, OH, the nation’s largest not-for-profit provider of affordable senior housing and services. He states, “The two main challenges we faced with COVID-19 and our senior population were, first their health and safety and the safety of our staff, making interactions as safe as possible. The second challenge was aggressively combatting isolation; how to give residents access to community and emotional support when access to both on-site service coordinators and their peers had been stripped away.”

“There are a lot of questions for when we come out of this,” Wilson Géno notes.

As far as how the pandemic would affect the demand for senior housing, Rule says, “At the beginning, we were really curious if there would be a drop in demand for congregate living settings. In fact, we haven’t seen that at all. The demand for affordable senior housing has stayed amazingly strong, whereas on our market-rate portfolio, lease-ups have been modestly slower.”

Mace is also concerned that as a result of the length of the pandemic, “Some of the middle-income group will fall into the lower-income group, putting even more stress on the system and the sustainability of both Medicaid and personal resources. The recession brought on by the pandemic is regressive in nature, which means that those still able to work are okay, while those who can’t, or don’t have jobs are treading water, at best.” This is why she sees a “K-shaped” recovery, with one diagonal line going up on the graph and another going down, representing those two cohorts. “For the second group of people, that downward spiral will last.”

While the pain of the pandemic has been severe across the board, Rule does see positives. “Covid has provided a real opportunity for all of us to empathize with the needs seniors have when we recognize the opportunities and services that aren’t available to them during this challenging time. A grant writer working on their Wi-Fi from home draws a great personal connection to why it is paramount to likewise provide seniors with affordable Wi-Fi in their homes.”

Technology and Connectivity
A subject that comes up in virtually every discussion of how Covid-19 is influencing the future of senior housing is the application of technology and connectivity.

“Technology is certainly playing a role,” says Mace. “The most obvious example is telehealth, which works surprisingly well in a congregate setting. And it’s going to figure in and be an ongoing challenge in buildings going forward. Any type of touchless technologies in the structure of buildings will be popular and will continue to evolve. Of course, retrofitting older buildings will not be easy.”

“The pandemic has accelerated the need to innovate,” observes Dave Cocagne, president and CEO of Vermillion Development of Chicago. “We find in our business that constant adaptation is necessary as we see to our residents’ physical and psychological needs, all of it complicated by the restrictions of isolation.”

“We’ve set up a virtual service coordination effort,” Rule says. “We all understand the importance of virtual services, but many of our seniors can’t take for granted connection to the virtual world. We need to find solutions to fix this issue. We’re being pressed into the urgency for whole-building Wi-Fi. From the philanthropic community, we’re seeing a real awareness of the importance of connectivity in senior housing. Huntington Bank just provided a grant to wire one of our buildings, and a lot of other funders are showing interest. We have the tools to help seniors avoid crippling isolation and owners, funders and advocates just have to coalesce around the effort to provide them with reduced cost of free Wi-Fi.”

“A lot of us are pushing the connectivity piece, both the wiring and the ongoing service costs,” Wilson Géno says. “We’re not going to be able to serve all the people who need us in person; we just don’t have the personnel, even if by some chance we open the immigration floodgates. We need a Wi-Fi system that is HIPAA-compliant and more robust and reliable in the transmission of data.”

Paying for It
“There has been some incentivizing for senior housing in state QAPs [Qualified Application Plans],” Wilson Géno says, “but it’s bounced around. There was a time when senior housing in QAPs was incentivized a lot.”

“One of the tools folks are getting much more aggressive about is four percent bond deals,” Rule notes. “Additionally, they’re cobbling together soft sources from state and local programs. RAD for PRAC [HUD’s Rental Assistance Demonstration for Project Rental Assistance Contracts] is a great tool for renovating existing projects. There’s also a small HUD program for new construction, but it’s limited; more sources are needed to keep pace with the need.”

“COVID-19 has significantly increased our costs,” Cocagne says. “For example, our dining rooms are set up in more socially distanced ways, which means more shifts for staff. It’ really driving us to be more innovative and creative.

“As far as subsidies, the federal government has done a variety of things. In Indiana, where we have about 915 residents in nine communities, the government has increased its share of Medicaid spending. Unfortunately, this has mainly passed through to nursing homes, not assisted living.”

Cocagne’s concern is one of the two main issues that come up repeatedly in any discussion of the interrelationship between senior housing and healthcare. As Mace explains, “In the continuum of care from independent living all the way up to hospitalization and the ICU, each level is much more expensive than the one right below it.”

Cocagne notes that the cost of care in a nursing facility is more than twice that of assisted living in a senior residential setting.

“We don’t have a good way of sorting people into their appropriate level of care, and how you move them back and forth as needed,” says Goodman. “How do you keep up with changing needs? The issue is very complicated and requires a lot more agility than the system currently has. Moreover, there is no economic way to meet the increased demand from aging Baby Boomers. At the end of the day, providing for the demand has to heavily involve government financing, one way or another.”

“We’ve seen some encouraging Medicaid waivers on the assisted living side,” says Rule. “We haven’t seen that same transition yet on the independent living side.”

The other funding issue has to do with what the various agencies and appropriations committees are willing and able to pay for, which in turn moves into a discussion of what are commonly referred to as the twin but distinct “silos” of housing and healthcare, belying Wilson Geno’s widely accepted assertion that housing is healthcare.

“NIC was among the first to put out the case that we needed to shift from a hospitality model [for affordable senior housing] to being involved with residents’ healthcare,” Mace says. “Covid has really brought that out: the value of preventive care over crisis management. It’s all about communication and transparency, providing education and knowledge.” This applies both to funders and to residents themselves, such as encouraging better choices like nutrition and exercise. “It’s really a win-win for everyone. It increases the resident’s length of stay in independent living, it’s also a morale builder for the staff and the quality of life for residents improves.”

Just as the housing appropriators don’t want to pay for health and wellness services, the healthcare side is reluctant to pay for housing. Meanwhile, the Covid-19 pandemic has demonstrated the need for more housing and more complex design solutions. “The pandemic has presented new challenges in design considerations,” Cocagne asserts. “How do we adapt to a crisis in cases? What are we going to do when it gets colder in the Midwest and we have no outdoor visitation? We have to find ways to adapt to the new reality. We deeply care about our residents’ well-being, so we have to anticipate contingencies.”

“The private healthcare industry is drawing the connection [between health and housing],” says Rule, “and are seeing the health impact. In the last year, tax credits on multiple National Church Residences’ developments have been bought by large healthcare insurance companies. Private healthcare insurers are investing in affordable senior housing and the next step is encouraging those same insurers to start to fund the supportive services that we know are so impactful to our senior residents.”

“Should we be looking at more outdoor space in new construction?” Wilson Géno asks. “Balconies and larger windows? More garden-style with separate entrances rather than high-rise with elevators? It’s pretty clear to us that a lot of spread of Covid is airborne, so HVAC systems are important, and older buildings are more vulnerable. We’re big users of RAD for PRAC, but that’s not accommodating the future [with new construction]. It’s some use, but we can’t do it all without additional capital.”

Goodman believes COVID-19 has put “more pressure on an already pressured system. What does this do to the construction of new senior housing when we need it the most? That’s the huge challenge.”

“New Jersey has incentivized healthcare payors to invest in affordable housing to stretch Medicare and Medicaid dollars, and some states have opened up CMS dollars,” Wilson Géno states. “But the real Holy Grail is allowing a national expansion of Medicare and Medicaid dollars for sticks and bricks and recapitalization,” Wilson Géno states.

A National Security Issue
“We can provide healthy housing for our seniors in a cost-effective way, or we can do it on an emergency basis, which, as we all know, is not the way to go,” Wilson Géno says. “The reality is, we have an affordable housing crisis in all forms, but the senior piece is more severe. Our ability to support it is literally a national security issue. If we don’t face it and figure out a way to supply it, we will have to borrow from foreign countries, like China and Russia. So, we have got to deal with this, investments in affordable housing, both the numbers and the quality.”

There’s not a single solution to this,” Mace says.

“We are a diverse nation. Personally, I think as the Baby Boomers begin examining their care and housing choices and needs, they’ll develop a lot of new solutions on their own. Maybe they’ll go back to communes, like in the 1960s or community settings where they will take care of each other. Maybe they will pay it forward: younger retirees want to do things, so they may offer to help take care of older or more infirm people and record the sweat equity, thereby contributing to their own retirement stability. I have mentioned this to a number of CEOs. So far, no one has jumped at it, but I keep talking about it and maybe the pay it forward concept will gain some traction at some point?”

As the Harvard study concludes:

“Providing the types of housing and neighborhoods needed by an aging population depends on concerted action by both the public and private sectors. Commitments to create age-friendly communities and the recent funding of affordable housing construction for older adults are promising starts. In addition, nonprofit and for-profit agencies are beginning to offer new models of housing with supportive services, although scaling up to meet the needs of lower- and middle-income households is challenging. In short, the time for more comprehensive, innovative policies—in the design, financing, construction and regulation of housing, in urban planning and design, and in the provision of community services—is now. The quality of life and well-being of a third of U.S. households depend on it.”

Story Contacts:
Dave Cocagne,
Sharon Wilson Géno,
Laurie Goodman,
Beth Burnham Mace,
Matthew Rule,