Credit: Tetiana Rashevska
Editor’s note: This is the second article in a two-part look at major challenges facing senior living, featuring exclusive interviews with five industry leaders. The first article focused on perennial labor issues exacerbated by the pandemic.
Ten months and counting into the coronavirus pandemic, senior living occupancy reached a record low of 78.8% in the first quarter of 2021 before leveling off in the second quarter and then increasing slightly in the third quarter.
Given operators’ reliance on private funds from residents, occupancy always is a major focus area. During the pandemic, when finances already are stretched thin, a return to pre-coronavirus levels is high on providers’ wish lists.
Now, as the pandemic nears its second anniversary, occupancy appears to be moving in a positive direction but still may be in recovery mode at this time next year — and maybe for much longer, industry leaders tell McKnight’s Senior Living.
“While third-quarter data from the National Investment Center [for Seniors Housing & Care] revealed an increase in senior housing occupancy to 80.1%, up from 78.7% in the second quarter, that rate is ‘still well below’ its pre-pandemic peak, researchers said,” LeadingAge President and CEO Katie Smith Sloan stated.
A significant rebound in demand, combined with a modest increase in supply, contributed to the 1.4 percentage point increase in senior housing (independent living and assisted living combined) occupancy in the third quarter, NIC said. But in assisted living, pre-pandemic occupancy was 85%, and in independent living, it was 89.7%, according to the 501(c)(3) organization.
Argentum President and CEO James Balda said that although he hopes that occupancy will be approaching pre-pandemic levels by the end of 2022, some point in 2023 is a more realistic expectation.
American Seniors Housing Association President David Schless, too, pointed to late 2022 or 2023 for a possible occupancy recovery.
“The data suggests that there are some communities that have recovered most or all of their COVID-related occupancy loss, while other communities still have a way to go and will be continuing to recover through 2022 and perhaps even into 2023, depending on the circumstances,” he said.
NIC President and CEO Brian Jurutka also pointed out that occupancy at any given property or market will vary depending on the product and local market conditions. “NIC MAP data powered by NIC MAP Vision shows that there are a number of properties at 90% occupancy or better, while there are also properties with occupancies well below 80%,” he added in late December.
Of the 31 metropolitan markets that encompass NIC MAP’s primary markets, the highest senior housing occupancy rates in the third quarter (July, August and September — the most recently publicized quarterly data) were seen in San Jose, CA (85.9%), San Francisco (84.5%) and Portland, OR (84.3%). The markets with the lowest occupancy rates were Houston (74.8%), Cleveland (75.5%) and Atlanta (75.8%).
“Atlanta tends to have strong demand, but they also have really ambitious developers, and so the demand can never catch up to itself,” NIC Chief Economist Beth Burnham Mace previously told McKnight’s Senior Living.
Overall, however, Jurutka was more conservative in his view of a full rebound than some other organization leaders. Although NIC doesn’t generate occupancy forecasts, it can provide context based on historical supply and demand data, he noted.
“If the record absorption seen in 3Q21 continues, occupancy could reach pre-pandemic levels by late 2023. If absorption follows historical trends, however, it could be late 2028 before pre-pandemic occupancy levels return at the national level.”NIC President and CEO Brian Jurutka
“If the record absorption seen in 3Q21 continues, occupancy could reach pre-pandemic levels by late 2023,” Jurutka said. “If absorption follows historical trends, however, it could be late 2028 before pre-pandemic occupancy levels return at the national level.”
During that time, operators may need to pass along some pandemic-related expense increases to private-pay consumers, he said. “Given well-publicized cost-of-living increases in the broader economy, it should be no surprise to residents that rents will likely increase,” he added.
Consumer confidence continues to improve
Longer term, extra measures taken by operators to keep older adults safe during the pandemic appear to have bolstered the confidence of prospective residents and their family members in senior living communities, which bodes well for move-ins, Jurutka said.
“Record third-quarter absorption spoke to residents and their adult children, who recognize the value proposition of senior living,” he said. “Senior living and care operators push to ensure residents and staff have access to vaccinations, boosters and testing while evolving processes and infrastructure to protect people against evolving variants.”
Senior living offers residents “meaningful social opportunities that distinguish these communities from other options.”ASHA President David Schless
On top of safety, senior living offers residents “meaningful social opportunities that distinguish these communities from other options,” Schless pointed out.
The importance of those connections were brought to the forefront with the lockdowns that were prevalent at the beginning of the pandemic. Operators since have created new ways to maximize chances to interact while adhering to safety guidelines and protocols.
“Our consumer outreach helped showcase the ways in which senior living took extraordinary steps to keep residents and associates happy, healthy and engaged during the pandemic,” Schless said, referencing ASHA’s Where You Live Matters website. “We also conducted several consumer studies for our members to better understand what older adults and their families wanted to see in order to feel safe.”
The association and peer organizations have been working to develop model infection control and prevention best practices to help ensure the well-being of residents and staff members as new variants of COVID emerge, he said, adding, “We also are tracking emerging technologies for operators that may reduce the spread of infectious disease.”
After decades of senior living being promoted as a hospitality model and a gradual move toward more of a medical or hybrid model by some operators in recent years before the pandemic, Jurutka said that “[t]he pandemic really drove the point home that senior living is home to millions of older Americans who require healthcare where they live.”
Research validates safety
One of the challenges for the industry, he added, has been that those outside of the business have viewed the sector as homogenous, “whereas those within the sector understand that a resident of independent living is very different than one in memory care or skilled nursing.”
For that reason and others, Jurutka said, NIC funded a grant to NORC at the University of Chicago to study the effects that care setting had on COVID-19 mortality rates among older adults. Results were published in mid-2021 and validated the safety of senior living.
“The study showed that residents of independent living had outcomes statistically the same as those living in traditional homes,” Jurutka said. “The study also showed that as the [care and service needs] of the average resident in a setting increased, so did the impact of COVID-19.”
The analysis found that 67% of independent living communities, 64% of assisted living properties and 61% of memory care communities studied saw no COVID-19-related deaths in the 10 months of 2020 that COVID was known to be present in long-term care. Overall, 64% of all senior living communities (independent living, assisted living and memory care) saw no COVID-19 cases, according to the researchers.
A follow-up study to be released this year will provide a more detailed look at the effects that COVID-19 has had on older adults, by care setting, Jurutka said. That study, he said, will consider differences in underlying health conditions and demographics.
Demographics are one of the reasons that the future of the industry remains “very bright,” Argentum’s Balda said.
“The demographics continue to be in our favor,” he said. “The pandemic further confirmed that there is a real need for what our communities provide.”
The key to success for the industry, Jurutka said, “will be to have communities that appeal to the next generation of residents’ body, mind and soul.”
“The industry has a great story to tell prospective residents and families about the quality of care and quality of life we provide.”Argentum President and CEO James Balda
‘A great story to tell’
Although occupancy will continue to be a challenge for the foreseeable future, “the industry has a great story to tell prospective residents and families about the quality of care and quality of life we provide,” Balda said.
The importance of storytelling extends “to policymakers who need to recognize our setting when responding to such crises, and to seniors and family members who are considering their long-term care options,” National Center for Assisted Living Executive Director LaShuan Bethea said. “We must make sure we have a seat at the table and that consumers understand the benefits we offer in a safe environment,” she added.
ASHA’s Schless said he believes that the industry will “emerge stronger, and many of the changes that occurred in response to the crisis will likely prove to be lasting and transformative and will influence virtually every aspect of the senior living business.” The evolution of the industry will include the design of new developments and renovations, the use of technology and telehealth services, enhanced infection control practices, and improved communications with residents and family, among others, he said.
Technology, Balda echoed, “took a leap forward and is continuing that pace of progress.” That and the changing world of work led Argentum’s recent decision to focus on policy and advocacy and outsource the planning of its annual meeting, he said, adding, “We have to safeguard an environment where innovations can continue.”
“Assisted living is used to innovating and adapting in order to meet evolving consumer demand as well as care best practices.”NCAL Executive Director LaShuan Bethea, J.D., M.Ed., BSN, RN
Bethea said she believes that COVID-19 will cause many assisted living providers to reconsider certain aspects when they build new communities, to ensure that they help reduce the spread of infectious diseases. “But assisted living is used to innovating and adapting in order to meet evolving consumer demand as well as care best practices,” she added.
For nonprofit organizations, Sloan said, strong governance will be critical to driving success and sustainability.
“COVID taught us that organizations simply cannot afford to not have an intentional, articulated vision and robust strategic planning in place to ensure that they can not only respond to the current difficult climate but will also survive and thrive in the years to come,” she said.
“COVID taught us that organizations simply cannot afford to not have an intentional, articulated vision and robust strategic planning in place to ensure that they can not only respond to the current difficult climate but will also survive and thrive in the years to come.”LeadingAge President and CEO Katie Smith Sloan