Steve Kennedy

Memory care will be the biggest growth area in senior living and long-term care in 2018, predict executives participating in Lancaster Pollard’s “2018 Seniors Housing and Care Survey,” the results of which were released Tuesday.

Lancaster Pollard received 386 responses to its survey, conducted in December, and 73% of participants said they were CEOs, owners or chief financial officers of senior living and long-term care facilities. Sixty-two percent of respondents were from for-profit providers.

Fifty-three percent of respondents forecast that Alzheimer’s/dementia care will be the biggest growth area this year, ahead of affordable housing, assisted living, independent living, home health services, hospice care, continuing care retirement communities and skilled nursing. In last year’s survey, respondents identified affordable housing as the top growth area.

“I think tax reform created some uncertainties with affordable senior living in 2017 — in particular, whether tax-exempt bond financing for 4% low-income housing tax credits would go away and what impact lower tax rates would have on tax-exempt bond and LIHTC demand,” Steven W. Kennedy Jr, senior managing director at Lancaster Pollard, told McKnight’s Senior Living. “Fortunately, the bullet targeting tax-exempt bond financing was largely dodged, but tax-exempt bond and LIHTC buyers will lose some relative value from decreased tax-rates. That can put some more pressure on project margins. While the need for affordable senior living product and alternatives is still tremendous, the need for Alzheimer’s/memory care is also tremendous, but that product was not directly impacted by potential tax reform concern.”

When asked about planned construction projects in their own organizations this year, however, assisted living was ranked highest among survey participants whose companies planned projects, with 37% indicating plans in that area compared with 35% with plans in memory care and 33% with plans in independent living. Last year, 44% of respondents had plans in assisted living and 40% had plans involving memory care.

“While Alzheimer’s / memory care units are increasing at a relatively rapid pace, the assisted living market is still significantly larger,” Kennedy said. “So on an absolute basis, we expect to see more assisted living development.”

Thirty percent of this year’s respondents said they had no plans for construction projects.

When asked separate questions about the three-year outlooks for various parts of the care continuum, a majority of respondents (58%) said the outlook for stand-alone assisted living communities was “good,” and 55% said the outlook for CCRCs was good. By comparison, only 19% of poll-takers said the three-year outlook for stand-alone skilled nursing facilities was good, with 34% saying it was “poor” and 33% saying it was “fair” (15% said the question was not applicable).

“This is a reflection of the more significant headwinds facing the SNF sector when compared with seniors housing (assisted living and independent living),” Kennedy said. “For example, SNFs are facing reimbursement pressures from tight state Medicaid budgets and changing reimbursement trends, including adapting to an increasing population of Medicare Advantage enrollees. Kindred’s exit, Genesis’ lease negotiations with its landlords and HCR ManorCare’s struggle to pay rent are symptomatic of such pressures unique to the SNF sector. On the [other hand], while rising labor costs are affecting both the SNF and seniors housing markets, seniors housing generally relies on private payers, providing seniors housing owner/operators insulation from government payor trends and, in turn, more margin capacity.”

Eighty-seven percent of poll participants described their local environments as “extremely competitive” or “competitive.”

The biggest concern among survey respondents was a shortage of workers, cited by 82%. A distant second concern was occupancy, cited by 51% of participants.

Access the full report here.