As the U.S. ages, more and more individuals have chronic conditions or functional limitations which may at some point require senior housing, such as independent or assisted living facilities and nursing homes. The question is, will individuals be able to afford this type of housing? According to a paper by Pearson et al. (2019), the answer for most people the answer will be ‘no’.
…by 2029 there will be 14.4 million middle-income seniors, 60 percent of whom will have mobility limitations and 20 percent of whom will have high health care and functional needs. While many of these seniors will likely need the level of care provided in seniors housing, we project that 54 percent of seniors will not have sufficient financial resources to pay for it.
The authors come to this conclusion by projecting future chronic conditions, functional limitations and income levels trends derived from the Health and Retirement Survey (HRS). Note that assisted living costs about $44,400 on average per year and costs have risen over time. Perhaps surprisingly, it may not be the poor who will not be able to afford senior housing, but instead middle income individuals may the ones get squeezed.
Seniors housing operators and investors have largely focused on the upper end of the income distribution. For lower-income people, state and local programs provide housing and care services via means-tested programs such as Medicaid… Although some middle-income people are living in seniors housing, the industry has not primarily focused on this cohort. This income group is generally too wealthy to qualify for public means-tested programs, yet not wealthy enough to pay the costs at many seniors housing communities for a sustained period of time.
The decrease in employer use of pensions and under-saving by employees through 401(k) options, make this issue even more acute.
- Caroline F. Pearson, Charlene C. Quinn, Sai Loganathan, A. Rupa Datta, Beth Burnham Mace, and David C. Grabowski. The Forgotten Middle: Many Middle-Income Seniors Will Have Insufficient Resources For Housing And Health Care Health Affairs.