A new report offers a formula that senior living operators, developers and investors can use if they want to serve middle income older adults. Or at least “food for thought,” one author told McKnight’s Senior Living.
The writers behind the “2019 Senior Living Trends Report” by consulting firm CliftonLarsonAllen looked at median household expenditures in four major categories — housing, personal consumption, healthcare/medical and other services — using numbers from the Consumer Expenditure Survey – 2017, released in September 2018 by the Department of Labor’s Bureau of Labor Statistics. “The median household expenditures offer a way to target the ‘median household’ in a manner that can illuminate where consumption occurs,” they wrote.
The median total spent on those categories per year by those 75 or older and living at home was $50,046, the authors found. The key for operators and others then, they said, is to bundle services and housing so that services provided at the community can be substituted for an older adult’s expenses of living at home (healthcare/medical costs, at a median of $8,450, would remain the same in either scenario).
The target for independent living: $31,521 per year, or $2,627 per month. The community’s monthly fee would need to cover rent, maintenance and utilities; one meal per day; some level of transportation; and opportunities for healthcare, wellness and socialization to facilitate aging in place, the authors said.
“If you can develop a product that’s around that price point that offers some basic services, you will be owning the middle market,” Mario Mckenzie, a CLA partner and one of the authors of the report, told McKnight’s Senior Living.
Senior living communities offer “a whole bunch of benefits,” he said. Operators, however, must “target these monthly fee levels, because I think that’s where people would see the value in leaving their home. …So if 80% of the population that’s over 75 is currently living at home, what we should really be saying is, ‘What are the benefits that they’re going to get from a different environment?’ How do we bring that to them?”
It’s not just about bundling versus unbundling services, he said — some have suggested separating housing from services as a possible middle market model.
Older adults currently living at home, Mckenzie said, “pay for meals, they pay for housing, they pay for these things, and they spend ‘X’ dollars. If you want to tackle this question, you need to be able to, for that same dollar amount, build a structure where they can pay rent and they get a certain level of services — a little bit of housing, meals, a little bit of transportation, whatever the case — sort of like a CCRC light.”
And it’s not just about price, Mckenzie said.
“It’s not good enough to provide something really cheap,” he said. “Staying at home is often much better than compromising on where you live.”
For those who want to come up with a solution to meet middle market needs, Mckenzie said, “What you want to do is say, ‘This is their current expenditure curve, and we need to take those same expenditures and now bring them into a retirement community.’ …The solution to look at is not replacing housing with housing that already exists in the marketplace — and people at home already have housing.”