Friday Feature: Affordability of Senior Living and Services

TGIF and Happy Hanukkah (to my Jewish colleagues and friends)!

A major concern as the demographic in the U.S. ages is senior housing and services affordability. The expanding cohort of seniors in terms of real purchasing power, is not as financially fit as prior generations. The Baby Boomers for example, while well paid in their careers and with access to 401(k)s, were not as savings directed as their parents. Further, they also did not experience the real estate escalation that their parents did (buying a house for $20K and selling for $200K, a 10-fold return).

A newly released study from Harvard Joint Center for Housing Studies and the National Investment Center found that only 14% of single people 75 and older can afford a daily visit of just four hours from a paid caregiver, and just 13% can afford based on their income alone to move to assisted living. Harvard_JCHS_Housing_Americas_Older_Adults_2023

The senior cohort in the U.S. is growing rapidly up 34 percent from 43 million in 2012 to 58 million in 2022.  The oldest old, 80 plus, is the fastest growing segment today.  This is also the group mostly likely to need housing and supportive services.

Per the report, “in 2021, nearly 11.2 million older adults were cost burdened, meaning they spent more than 30 percent of household income on housing costs, an all-time high and a significant increase from the 9.7 million recorded in 2016.”  

The financial ability to afford housing and services varies widely by demographics, ethnicity, race, and home ownership.

•  Black homeowner median equity = $123,000
• White homeowner median equity = $251,000
• Hispanic homeowner median equity = $200,000
• Asian, multiracial, other median equity = $270,000

Institutional living among senior adults (congregate, senior housing or assisted living) while growing, is not the predominant location.  In 2021, 97.5% of all seniors lived in their own home (88.2%) or in the home of someone else (9.3%).

As this senior cohort ages, their financial status typically declines, especially in terms of real income. In 2022, the median household income for adults age 80 and older was $37,100, as compared to $54,900 for those age 65–79 and $87,800 for those aged 50–64.  For the period 2012 to 2022, median income for households 65 and over rose by 16 percent between when adjusted for inflation. During this same period, median income grew by 23 percent for older households in
the highest income decile and only grew by 0.5 percent for older households in the lowest decile. 

Income disparity has grown noticeably among households headed by people 80 years old. For this group, households in the lowest income decile saw their real income decline 0.3 percent between 2012 and 2022, while households in the highest decile saw 24 percent growth in income.

What the report points out directly, is that among older adults, especially in the up-and-coming cohort of Baby Boomers, economic wealth is highly stratified, and disparities are many (by income, by age, by gender and by ethnicity). The costs of senior living and services are not decreasing and in the post- pandemic period, the industry has seen higher than historic fee increases.  

In my post yesterday, I looked at Medicaid and in particular, HCBS.  Medicaid too is struggling from a financing perspective as more seniors and larger portions of the non-senior population, look to the program for services and supports.

The challenges going forward are many and daunting.  This is an election year and debt and deficits plus an inflationary economy are front-and-center, or should be, as candidates posture for elected office.  A few points for this upcoming election season (and I will address each in 2024)…

• Entitlement spending on programs such as Medicare and Medicaid are the largest, non-discretionary expenditures in the federal budget.  These programs are not shrinking and advancing age across the U.S., will include increased programmatic service demand from these programs.
• Real wages have not been growing as fast as the costs of goods and services over the past two years.  Household incomes have fallen in terms of purchasing power, including senior households.
• Residential home buying has suffered and thus, realized returns for seniors via home sale have stalled. While home prices remain stable to high, buyers cannot via increased mortgage costs, afford to purchase many homes that could be for sale.
• Due to supply costs and higher cost labor, care service inflation is expanding rapidly.  As the lion share of senior living and care first require the senior to pay privately before any government program support, higher costs draw down estate savings faster, creating additional strain on senior estate values, incomes, etc. plus, a more rapid population need and use, for Medicaid resources.

TGIF!