Demand for middle-market senior housing surges in California’s expensive, diverse market

While it’s no secret that middle-market senior housing is a vastly underserved market, newly released data shows just how dire the situation is in the nation’s most populous state.

California’s middle-income elderly population is expected to increase by more than 60% to 1.6 million people by 2033. More than half of this group will likely lack the funds to afford assisted living and medical care in the next decade. And if equity is not considered, about 90% will struggle to afford privately paid assisted living at current rates of $75,000 per year.

These statistics come from NORC at the University of Chicago, which was the key organization behind the “Forgotten Middle” study, first released in 2018 and recently updated.

A companion Forgotten Middle study quantified the upcoming demand for middle-level senior housing nationally, but market and demographic conditions vary widely from state to state. That’s why researchers focused specifically on California in the work, which was shared via a recent blog post by the National Investment Center for Senior Housing and Care (NIC).

California is “significantly” more racially and ethnically diverse than, say, the United States as a whole. By 2033, people of color will make up 47% of the population of middle-income older adults over the age of 75.

In addition, average assisted living costs are 17% more expensive than the national average, NORC researchers noted in a presentation of their findings. One in five people in the middle-income senior cohort have “significant” home equity, but even so, 49% of this group will have annual financial resources of less than $75,000 per year by 2033.

Additionally, Californians are more likely to be without children living within a 10-mile radius, and nearly 60% of middle-income seniors will be single in 2033.

“Seniors who are single (divorced or widowed) and those without children nearby may not have unpaid sources of care,” the researchers noted.

And by 2033, more than 1 million California seniors are projected to be “near dual” — that is, nearly eligible for both Medicaid and Medicare. This group is at risk of spending to qualify for Medicaid. And 46% of the cohort will be people of color; 57% are likely to have mobility limitations, while nearly 50% will have three or more chronic conditions.

Even within California, there are dramatic differences in affordability from market to market.

In one hypothetical case study, the researchers present a woman with dementia who requires day care and has annual financial resources of $79,484. Living in El Centro, full-time personal care services would take 49% of her financial resources, and assisted living would consume 88% of her financial resources. Living in San Francisco, full-time personal care would consume 98% of her financial resources, while assisted living would consume 90%.

As is the case nationally, senior housing providers have an opportunity to significantly increase the size of their market if they can lower the price of assisted living. A $10,000 price reduction would mean that an additional 209,000 Californians would have the resources to afford the product, an expansion of the market of more than 25%.

Still, providers still have a long way to go to create a scalable mid-market assisted living product. Companies like Merrill Gardens are taking steps in this direction by launching brands with new operating models. Truewood by Merrill — Merrill Gardens’ middle-of-the-road brand — has begun offering more affordable assisted living and memory care in California.

And demand for the middle-class senior housing product is even greater than the numbers shown in the NORC studies, Merrill Gardens President Tana Gall said at last year’s Senior Housing News BUILD conference. This is because some wealthy older adults are attracted to a more economical way of life.

“This customer base is bigger than we even think,” she said.

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