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Senior housing shortage

Created date

March 30th, 2009

Demand remains steady, but dwindling supply threatens

By Mark Abromaitis

With millions of baby boomers officially becoming seniors, and an economic slowdown rearing its head, experts are warning that there may be a shortage of retirement community housing by the end of the year.

David Schless, president of the American Seniors Housing Association, explains, There is no capital out there for [new] construction, and virtually every company I know of in this industry has really curtailed their plans to develop . In certain markets, you ll probably see significant waiting lists for many different types of senior housing.

Construction freeze

New construction in the retirement living industry has slowed to a crawl because banks have tightened lending terms, making it difficult for even the most trusted and financially stable companies to secure loans for expansion. That could lead to a problem for many who are planning to move to a retirement community.

One of those trusted companies, Erickson Retirement Communities, a 25-year leader in the industry, has already reined in its new construction schedule, pushing back new construction projects.

Right now we are focusing much of our effort on selling our remaining inventory, says Jim Kelly, regional vice president of sales for Erickson. With demand remaining steady and no plans to break ground in the near future, our supply of available apartment homes is definitely dwindling.

Kelly estimates that at the current reservation rate, shortages at some communities could appear by October. If you want to move in the next few years, your best bet is to get in now or you may face an even longer wait because even once the credit markets unthaw, it could take until 2011 until new inventory is built and ready.

Demand remains strong

Jill Gilbert, the president of Gilbert Guides, a San Francisco based publisher of guidebooks on a variety of senior topics, says interest in retirement communities remains strong.

We desire hasn t diminished, she says. Many people are drawn to the security, convenience, health benefits, and social life that retirement communities provide.

And according to the most recent National Investment Center for the Seniors Housing & Care Industry report, the retirement community industry as a whole continues to thrive due to millions of baby boomers entering the retirement community market and many communities offering incentives to move.

We performance of senior housing in the fourth quarter was surprisingly strong given the rapid deterioration in the economy and financial markets in the quarter. Revenue growth rates remained robust, the report says.

Reward for those ready

Kelly says it s actually a great time for those considering a retirement community. Luckily, for the consumer, if you are ready to move right now, many companies, including Erickson, are doing everything in their power to compensate for the soft housing market, he says.

Kelly points out that Erickson, for example, has adjusted its pricing in a number of markets and now offers the help of its own realty, home staging, and moving company to make life easy for those moving in.

We re actually seeing a lot of people taking advantage of these great incentives, he says. Erickson officials say that at the current settlement rate of almost 3 per day, its entire nationwide inventory of homes will be exhausted by Feb. 2010.