Senior man sitting at the table and calculating finances. Old man checking bills. Man counting coins on the table. Pension calculation concept
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The time has come for the senior housing and care sector to figure out how to scale housing and services to meet the needs of the growing market of middle-income older adults, a panel of experts said Thursday.

The National Investment Center for Seniors Housing & Care hosted a discussion about potential strategies to serve the almost 16 million middle-market older adults projected to need care or housing within the next decade.

The existence of “forgotten middle” rose to prominence in the senior living space in 2019 with the release of a NIC-funded study conducted in partnership with NORC at the University of Chicago and projecting both the housing and healthcare needs of older adults based on income. That study was updated in 2022, sounding the alarm that 72% of older adults won’t qualify for public assistance and likely will be unable to pay for their long-term care needs in the future.

Last month, a report from the Harvard Joint Center for Housing Studies stated that only 13% of adults 75 and older who lived alone can afford to move into an assisted living community without spending down their assets. Another NIC-funded study released earlier this month by the Milken Institute presented potential solutions to improve the financing and delivery of housing for the middle market. 

Thursday’s panel of experts said that ways exist to start to address the looming housing and healthcare challenges for this large group of middle-income older adults.

A once-in-a-lifetime opportunity

Bob Kramer, NIC co-founder and strategic adviser, said that it’s important to realize that the middle market is an “incredibly diverse group.” Pointing to a study published last month in Health Affairs, Kramer said that there is a widening gap within the “forgotten middle” — those on the upper end of this group have seen improvements in health, longevity and financial stability, whereas those at the lower end of the income group have experienced a significant decline in all three areas. 

For providers considering delving into middle market service, Kramer said, it’s important to address which part of the middle market to serve, identify the level of services to be provided, determine payment sources and identify any barriers to scale.

“This Is not a one-size-fits-all approach,” he said. “We have to look at income levels, overall financial resources, and healthcare and long-term care needs of which part of the middle market you are seeking to serve.”

Pilar Carvajal’s Innovation Senior Living focused its portfolio on middle-income older adults beginning in 2016 by acquiring distressed properties and repositioning them to serve Medicaid-eligible and middle-income older adults. 

“It’s about thinking creatively to serve a population that desperately needs us,” Carvajal said. 

Although the middle market is large, she said, it’s still emerging, and convincing debt and equity partners to “jump in the sandbox” remains difficult. But she sees that changing very soon.

“We have an enormous, underserved demographic that presents not only an incredible financial opportunity of a lifetime, but an opportunity to solve a societal crisis,” Carvajal said. “Our vision is to make the middle market commonplace. I think what I’d like to see is social impact investing — those that want to invest but also want to solve a societal issue.”

Innovation Senior Living’s approach, Kramer said, is the opportunity developers need in order to enter the middle market.

“We have an historic, once-in-a-lifetime opportunity right now to have an innovative program to address the middle market,” he said. “We have for the first time a number of senior housing properties underperforming and underwater financially, with significantly lower valuations — we have an opportunity to reposition these older properties in high-end primary metro markets.”

Tackling barriers to development

The most significant barrier to middle-market development is cost-effectively scaling projects, Bellwether Enterprise Real Estate Capital Vice President Lundat Kassa said, adding that public-private partnerships are essential to create a financing solution.

Kramer said that public policy barriers to expanding middle-market development also exist, particularly treating eligibility for housing and healthcare as two different things. 

“Matching eligibility criteria for housing on the one hand and housing / long-term care on the other hand is incredibly frustrating,” Kramer said. “The challenge is, there’s not a lot of money for them.”

Lisa McCracken, NIC head of research and analytics, said that in tracking middle-market development successes, a key feature is a focus on prevention, that is, keeping residents out of high-cost skilled nursing facilities by keeping them healthy and safe in an independent living or assisted living community

Carvajal said that vitality is important to think about when positioning a development for the middle market, and that focus can be achieved by partnering with physicians, hospice, home health and value-based healthcare models.

Working with local community service providers to meet the needs of residents will achieve the goal of maintaining resident health while keeping costs down, Kramer added.

Jon Fletcher, Presbyterian Homes & Services and Senior Housing Partners senior vice president, said that his organization brings in home- and community-based services and other “wraparound” services to accomplish that goal.

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