Senior housing market shifts focus amid rising boomer demand

The senior housing market is poised for significant changes as the aging baby boomer generation begins to reach their 80s. With the U.S. population of those aged 80 and older expected to rise by over four million by 2030, there is a growing demand for senior living facilities. However, this surge in demand could lead to a shortage of available units.

Arick Morton, chief executive of NIC MAP, highlighted the unprecedented nature of the current demographic trends: “We’ve never had a population pyramid that looks like this.” He pointed out that to meet the rising demand, "the senior housing industry would need to develop twice as many units as it has ever developed in any single calendar year every year."

High interest rates and construction costs have deterred new developments, with many developers focusing on acquisitions instead. Shankh Mitra, CEO of Welltower, noted on an earnings call that despite growth prospects, most developers have halted new projects due to economic challenges. Welltower itself spent $6.2 billion on acquisitions in the first three quarters of 2024.

Investors find acquisitions appealing because existing communities can be bought at prices lower than construction costs. David Selznick from Kayne Anderson Real Estate remarked, “It doesn’t make sense today to put shovels in the ground except for a handful of top-tier deals.”

Despite these challenges, occupancy rates have returned to pre-pandemic levels and rent growth has resumed. Still, Green Street reports about half of seniors cannot afford private senior housing without third-party reimbursements.

Baby boomers are noted as being wealthier than previous generations; more than 40% could afford senior housing from income alone according to Green Street data. However, many seniors prefer aging at home due to advances in design and technology.

Developers who do embark on new projects often cater to affluent seniors with luxurious amenities. A notable upcoming project is a high-end facility in San Diego’s Rancho Santa Fe community featuring golf cart paths and other upscale features.

As Wall Street favors acquisition strategies during these times—Ventas and Welltower outperformed indices significantly last year—the sector faces both opportunities and hurdles as it prepares for an influx of aging boomers seeking diverse living options.