The ability of continuing care retirement communities to outperform other care settings and maintain consistently high occupancy rates throughout the COVID-19 pandemic offers lessons for the rest of the senior housing industry, according to the National Investment Center for Seniors Housing & Care.
A NIC analysis published by specialty investment bank Ziegler looked at occupancy and year-over-year changes in the fourth quarter of 2022 within 1,084 not-for-profit and for-profit life plan communities / CCRCs in 99 NIC MAP primary and secondary markets.
A consistent pattern emerges from the research, according to NIC: “properties where demand and occupancy contracted more severely during the height of the pandemic are rebounding more quickly.” The lowest occupied properties or care segments were able to generate new demand and increase occupancy faster, but this growth occurred mainly because of lower in-place rates and minimal or even negative rate growth, NIC said. “The fact that these properties/segments had minimal/negative rate growth also suggests that their demand and occupancy may have contracted more severely during the height of the pandemic, and to accelerate the recovery of occupancy, one potential option was likely to lower rates in an attempt to buy occupancy.”
CCRC occupancy increased to 87.2% in the fourth quarter of 2022 for the combined markets — up 0.6 percentage points from the third quarter, and it increased 3.1 percentage points from a record low during the pandemic. But the sector remained 4.2 percentage points below its pre-pandemic level of 91.5% in the first quarter of 2020.
By comparison, combined occupancy for other sectors — independent living, assisted living and nursing care — stood at 80.9% in the fourth quarter of 2022, 6.3 percentage points below CCRCs. Collectively, non-CCRCs experienced a larger decline in occupancy rates (11.3 percentage points) during the height of the pandemic compared with CCRCs (7.4 percentage points).
A COVID-19 study from NIC, conducted by NORC at the University of Chicago, found that CCRC residents were significantly safer than older adults living in other care settings or in the community at large.
Profit status affected occupancy recovery
Overall, occupancy rates for not-for-profit CCRCs in the fourth quarter (88.2%) outpaced those of for-profit communities (84.3%) across all care types. Compared with the first quarter of 2020, not-for-profit CCRCs overall were 4.4 percentage points lower in occupancy in the fourth quarter of 2022, whereas for-profit CCRCs remained 4.1 percentage points below pre-pandemic occupancy levels.
The difference in fourth-quarter 2022 occupancy rates between not-for-profit and for-profit CCRCs was largest for the assisted living segment (4.5 percentage points) and smallest for the nursing care segment (1.7 percentage points). The not-for-profit independent living segment had the highest occupancy (90.8%), followed by the assisted living segment (87.5%) and the memory care segment (86.5%).
Payment status also made a difference
The NIC analysis also found that entrance-fee CCRC occupancy (89.2%) was 5.4 percentage points higher than rental CCRCs (83.8%). Overall, rental CCRCs, which saw steeper drops in occupancy during the pandemic, now have occupancy that is 5.2 percentage points below pre-pandemic occupancy levels, whereas entrance-fee community occupancy is 3.8 percentage points lower.
The Northeast, Pacific and Mid-Atlantic regions had the strongest entrance-fee CCRC occupancy rates in the fourth quarter — all above 90%. For rental communities, the Mid-Atlantic, Northeast and Pacific regions had the highest occupancy rates for the quarter, ranging from 86.1% to 87.8%.
Regional differences affected occupancy rates
The largest differences in fourth-quarter 2022 occupancy between not-for-profit CCRCs and for-profit communities were in the Southwest (6.4 percentage points), followed by the West North Central regional (5.8 percentage points), the Mid-Atlantic region (4.8 percentage points) and the Northeast (4.7 percentage points).
Not-for-profit communities in the Mid-Atlantic (91.1%), Northeast (90.6%) and Pacific (88.2%) regions had the strongest occupancy rates in the fourth quarter of 2022. The Southeast region had the lowest occupancy, at 85.3%.
For-profit communities in the Pacific (90.8%), Mid-Atlantic (86.3%) and Northeast (85.9%) regions had the strongest occupancy rates in the fourth quarter of 2022. The Southwest and West North Central regions had the lowest occupancy, at 80.2%.
NIC identified a consistent pattern of quicker occupancy rebounds where demand and occupancy fell more severely during the height of the pandemic. According to findings recently released by NIC Analytics, Ziegler noted, the lowest occupied properties were able to generate new demand and increase occupancy faster.
But NIC attributed this largely to lower rates and minimal — or even negative — rate growth.
The monthly average asking rent for not-for-profit CCRCs across all care segments within the communities remained higher than in their for-profit counterparts, except in the independent living care segment, which had the highest year-over-year asking rent growth in both not-for-profit (4.2%) and for-profit (4.5%) communities.