The Recession Hits Retirement Communities
April 01, 2009 12:04 PM ET | Philip Moeller
Many older Americans are finding that the economic meltdown has put a big crimp in their plans to move into retirement communities. Aside from cracked nest eggs, falling home prices and weak home-buying demand have also forced many seniors to stay put rather than make the transition. That’s because they often pay for retirement-community slots with funds from the sale of their existing homes. Vacancies rose sharply in the nation’s retirement communities last year, according to the National Investment Center for the Seniors Housing and Care Industry (NIC). Long waiting lists were once the norm, but no more.
The NIC MAP Data Analysis Service tracks business conditions in retirement facilities in the nation’s 31 largest metropolitan areas, and includes only professionally managed, market-rate facilities with at least 25 units. It released data on independent living units, assisted living facilities, and continuing care retirement communities, which include both independent and assisted-living units. Information about nursing homes will be released at a later date, a spokesman said.
Only a handful of the metro areas following by NIC MAP avoided declines in occupancy rates last year. Even so, stated purchase prices and rental rates were relatively stable. However, as the NIC spokesman noted, weak market conditions have caused widespread discounting and other special lease and purchase arrangements, including lengthy payment deferrals. These provisions are not reflected in the stated price levels.
Consumers can get great deals these days, but they should be careful to avoid communities with financial problems that could jeopardize maintenance and amenities. It’s also smart to take a look at a facility’s financial documents before making a decision, and avoid places that will not provide confirmation of their financial stability.
Here’s a look at trends by type of living community:
Independent living. High occupancy rates were maintained in Boston, Minneapolis, Pittsburgh, and San Jose. The biggest declines were in the Riverside-San Bernardino-Ontario market in California (occupancy was off by 5.8 percent to 87.5 percent), Tampa-St. Petersburg-Clearwater (off 5.2 percent to 87.2 percent), and the Sacramento market area (down 4 percent to 89.4 percent). Because of the long lead time in bringing new units onto the market, there was more than a 4 percent boost nationally in new units coming onto the market last year, according to NIC MAP. The biggest inventory surges were in Philadelphia (a net gain of 1,590 units, or 6 percent), Phoenix (up by 1,444 units, or 11 percent), Seattle (1,393 more units, also up 11 percent), and Denver (a net increase of 1,174 units, up nearly 20 percent).
Assisted living. The story is similar here, except there were large occupancy-rate declines in Detroit (off 8.7 percentage points to 82.9 percent), Kansas City (at 84.5 percent, down 7.3 percentage points), and Miami (off 5.5 percentage points to 84.5 percent). By far, the biggest assisted living markets are in the multi-state New York metro area (17,031 units and an occupancy rate of 92.4 percent, off from 93.5 percent at the end of 2007) and Los Angeles-Long Beach-Santa Ana (15,678 units and an occupancy rate of 86.2 percent, down from 89.9 percent). The supply of available units rose modestly during the year.
Continuing care retirement communities. The CCRC model offers a full range of living arrangements, with many newcomers occupying independent living units and then moving into assisted units as they age, and perhaps still later occupying nursing or Alzheimer facilities. Some entrants buy their units and pay substantial entrance fees, while others rent. Two markets were particularly hard-hit in 2008 in both CCRC categories. The Dallas-Ft. Worth-Arlington area occupancy rate in entrance-fee CCRCs dropped to 87.7 percent from 94.9 percent, while its occupancy rate for rental CCRCs fell to 87.7 percent from 93.2 percent. In the Tampa area, the drop for entrance-fee CCRCs was to 89.3 percent from 95 percent and the decline for rental CCRCs was even steeper, to 85.2 percent from 93.3 percent. The nation’s largest entrance-fee CCRC market, by far, is the Philadelphia-Camden-Wilmington region, with 20,740 units. Its occupancy rate was off slightly to 92.8 percent from 93.5 percent.