Proactive alliances among stakeholders can lead to assisted living departments
LOS ANGELES: The assisted living sector is in the midst of a paradox: demand is rising with awareness of the benefits of the setting, but squeezed profit margins are slowing down development to meet the needs of a growing population of older adults with complex care needs, according to one expert.
In a recent blog post, Ryan Olson, senior vice president at real estate services and investment management firm Colliers, wrote that the aging population is driving an “urgent” need for more assisted living units.
The benefits of assisted living
The assisted living sector is benefiting from a growing awareness of its benefits — namely, social interaction and access to healthcare, Olson said. That sentiment has been supported by recent reports on the value of assisted living in the long-term care continuum.
Last year, US Surgeon General Vivek Murthy, MD, announced a “National Strategy to Advance Social Connections” to address an “epidemic of loneliness and isolation.” In the wake of that advisory, the senior living industry held up assisted living as a way for older adults to strengthen social connections, bolstered by previous research.
For instance, a 2022 report from the American Seniors Housing Association and ATI Advisory found that senior living communities reduced social isolation and improved quality of life during the pandemic, with residents being more likely to have higher social, physical and intellectual wellness than their counterparts living in the greater community.
And in 2021, a survey from Activated Insights reported that just 20% of senior living residents reported feeling “severely lonely.” That survey, however, also revealed a potential decline in loneliness among older adults in assisted living and other congregate living settings from before the pandemic.
In January, the National Center for Assisted Living released a “fact check” on the assisted living industry, pointing to studies showing that residents and families are consistently happy with the care they receive. NCAL also highlighted a report from NORC at the University of Chicago that found that assisted living communities help reduce residents’ frailty after move-in.
Economic pressures slowed development
Despite that demand, Olson said, developers aren’t jumping on the bandwagon to start new projects. He outlined several economic pressures that have led to decreased profit margins:
Inflation: The COVID-19 pandemic highlighted vulnerabilities in global supply chains, and tightening labor markets resulted in increased wages, leading healthcare providers to compete with other sectors for skilled workers.
Indoor air quality: Indoor air quality guidelines were elevated as a result of the pandemic, requiring operators to make significant investments in upgraded ventilation systems.
Interest rates: Higher interest rates made financing for new projects expensive, as tighter credit markets dampened the feasibility of building new buildings.
Regulation: Compliance with new health and safety standards in the wake of the pandemic led to higher operational costs, further deterring investment in new projects.
“As a result of these challenges, many developers have paused or scaled back their plans for new assisted living facilities,” Olson wrote. “This delay could exacerbate the existing supply-demand imbalance, ultimately harming seniors seeking safe and supportive living environments.”
But Olson said hope exists for the future.
Heightened demand for assisted living is leading industry stakeholders to innovate and adapt through technology to enhance operational efficiency, to create partnerships for shared resources, and to provide flexible financing to encourage investment in the sector, he said.
“While the assisted living industry is facing a paradox of increased demand and stalled development due to economic pressures, proactive measures can help navigate these turbulent waters,” Olson said, adding that stakeholders must collaborate on solutions to provide more assisted living units for the older adults who need them. “As the landscape evolves, attention to these nuanced dynamics will be crucial for fostering a robust future in assisted living.”