The Impact of Housing Corrections on the Seniors Housing Industry (and What to Do About It)
Here’s an old chart from the unmatched and unparalleled National Investment Center (US spelling) for Seniors Housing and Care, commonly referred to as NIC. NIC has no Canadian counterpart—nothing even comes close. CMHC publishes its Seniors Housing Report every year and it’s useful but very limited. Years ago CMHC used to do all kinds of research on seniors housing but they haven’t done anything noteworthy for a very long time.
NIC observed the following, post Great Recession of 2008-2009 about the demand for IL housing, meaning housing that provides services such as meals and housekeeping. IL stands for Independent Living, the term commonly used in North America to describe this kind of housing.
Up until that time, most people assumed that the seniors housing industry was largely need-driven, meaning that no matter what happened in the conventional housing market, the demand for seniors housing would remain more or less stable.
The Great Recession most definitely changed a lot of people’s minds about that belief.
If we are about to encounter another housing downturn because of interest rate increases, what will that mean for the emerging demand for service-enriched seniors housing? It’s a complicated question at the best of times but it’s even more complicated coming out of a demand depressing pandemic. Will pandemic-induced pent-up demand cancel out the impact of a housing slowdown?
On this point remember the John Kenneth Galbraith quote: Economists don’t forecast because they know; they forecast because they’re asked. He also said that the only function of economic forecasting was to make astrology look good.
That being said, it is the considered opinion of this blog that the two forces won’t cancel each other out and that a pronounced downturn in the housing market will adversely affect occupancy levels in service-enriched housing projects. People have learned to adapt at home in order to avoid a virus; riding out a housing downturn at the same time is just an added benefit.
If you are an operator, what can you do about that? From the perspective of the virus, the strongest and most effective marketing messages focus on safety and on socialization opportunities. From the perspective of a drop in housing prices, it is very difficult to counter the psychological impact of perceived losses, even if prospective residents have lived in the same house for 50 years. Best not to try. Play the virus game—focus on safety, socialization opportunities and good food you don’t have to cook yourself.