Baby boomers want more from senior housing
Originally published in the September 29, 2003 issue of the Minnesota Real Estate Journal.
It's no secret that the aging baby-boom generation is redefining senior housing as it redefined popular culture. The 77 million baby boomers born between 1946 and 1964 will double the demand for senior housing over the next 20 years. This fact has fueled rapid growth in the industry over the last four to five years. In its "Senior Housing Update 2003," Maxfield Research recently reported that more than 2,000 senior housing units were constructed in the Twin Cities metropolitan area last year. This continues a trend that started in 1999, which almost doubled the production of senior housing units as compared to the previous four years. As a result, vacancy rates have trended slightly higher at 3.8 percent.
A changing market
Looking at the young end of the senior market, baby boomers just beginning to look at age-restricted housing demand different options and services than the previous generation. For instance, there is a stronger emphasis on active living. Some of the fastest growing developments are in the south and southwest with access to healthcare and recreation, such as golfing, biking and health clubs. In Florida, developers are building "in-law" suites for seniors in new housing developments. Although suites can be used for guests, live-in childcare or returning children, the greatest demand is for senior housing for parents.
According to Issue Watch, published by the Minnesota Department of Administration, a Georgia builder is developing ranch-style condominium communities in clusters of four, primarily single story units on small lots.
The homes feature amenities which cater to an aging population. Electrical outlets are placed at a higher level to reduce back strain and levers are installed instead of doorknobs.
Condo, co-op ownership popular
There is a subtle but marked shift to home ownership among seniors in recent years. Seniors once preferred rental and fee-based housing options because of the ease of getting into new housing, the lack of responsibility for maintenance and repair of units, and the ease of moving on to housing with services. Today, senior housing provides services that allow seniors to age in place. Lower interest rates also make ownership an attractive option. Consequently, developers of condominium housing and cooperative housing have gained a greater share of the market.
Maxfield Research reports that owner occupied housing could reach 20 percent in 2005 if all proposed condo and co-op projects are constructed. This is up from 9 percent in 1995.
Realife Inc. pioneered the cooperative form of senior housing in Minnesota over 25 years ago and is opening projects in Coon Rapids, St. Paul, Osseo and Bloomington to meet the growing demand for this product.
Urban villages include senior housing
In the Twin Cities market, master developers, such as The Hartford Group ,are including senior housing as a component of the popular urban village concept. The concept includes housing, retail shopping, restaurants, commercial offices and services all linked by walking trails, shared parking and open space amenities.
The village concept is one trend that attracts a generally healthy and wealthy senior population. Some local governments are willing to invest public dollars to bring about a unified package of development as compared to piece meal, parcel-by-parcel development. Using this village concept, a master developer can add value and pull together the pieces needed for an intergenerational community. With a fairly modest investment of public dollars, say 5 percent to 10 percent provided through tax increment financing or tax abatement, a city can leverage amenities that are not typical in suburban development. The cities of Apple Valley, Maplewood and Lino Lakes are all developing or reviewing projects of this type.
Rural development still tough
The state of Minnesota recently looked at the ratio of senior housing in greater Minnesota to similar housing in metropolitan areas. Generally, the Minnesota Department of Human Services found that twice as many units of senior housing have been built in the metropolitan areas.
One of the biggest limitations to these projects is the income that can be derived from rents in the rural areas. While construction and financing costs are largely the same, the available rent from rural projects is fairly limited. Therefore, it generally takes a sponsoring organization, such as a church group, county HRA or economic development authority to equalize revenue from development.
On the other hand, receptivity to senior housing in greater Minnesota has increased significantly because of unmet demand. Some cities may also waive development fees and costs in order to entice a senior project to rural communities.
Changes in nursing care
In the area of nursing care, the trend is to provide a greater range of services to larger independent units in a campus environment. Another trend is the conversion of skilled nursing beds to acute and sub-acute care.
While these changes are indicative of Minnesota's moratorium on new nursing beds, the trend will also drive a conversion of traditional care facilities to a continuum of care. In this concept, families choose a campus setting where seniors have the opportunity to age in place and select their care level based upon their needs and preferences. In some places, including in the southwest, traditional senior housing has been linked to hotels, restaurants and resorts.
Larkin Hoffman forms senior housing group
To meet this demand, Larkin Hoffman has pulled together a group of attorneys with distinct experience in supporting senior housing. As a sign of the times, a greater percentage of transactional and regulatory work has been associated with senior projects.
While the firm has been active in senior housing for nearly 30 years, the group brings a team approach to land use, zoning, environmental review, real estate acquisition, public financing, construction contracts, title clearance and regulatory issues, such as facility and professional licensing. This group combines the skills and experience of the firm's real estate, healthcare and administrative law practices.