Senior Living Facilities: Market Size
In 2018, the U.S. assisted living facility market size was estimated at $73.6 billion and expected to register a CAGR of 6.4% during the forecast period – 2019 – 2026. Therefore, using the reverse CAGR calculator (online), the 2020 U.S. assisted living facility market size is estimated at $83.32 billion. In 2016, the U.S. government held about 1.3% of the residential care community market.
- In 2018, the U.S. assisted living facility market size was estimated at $73.6 billion and expected to register a CAGR of 6.4% during the forecast period – 2019 – 2026.
- To determine the expected market size in 2020, the reverse CAGR calculator formula can be applied, i.e.,
- FV = SA x (CAGR / 100 + 1)^n,
- FV — Future Value
- SA — Starting Amount/Value
- n — # of periods
- Using the formula, the market size in 2020 is calculated as follows:
Breakdown of the U.S. Senior Living Facilities Market by Ownership Type
- According to CBRE, there are approximately “23,500 professionally managed senior housing and nursing care facilities” with more than 25 beds/units in the U.S., representing an estimated 3.04 million professionally managed units/beds.
- Data published by the National Center for Assisted Living estimates that 56% of senior housing facilities are owned by chain-affiliated organizations, i.e., (organizations with two or more senior housing communities), while independently-owned facilities accounting for 42% of the market ownership.
- The top ten U.S. senior housing providers control 30.8% of the independent living (IL), assisted living (AL), and memory care (MC) total supply. Equally, seven providers in the top 10 category are publicly traded companies, two are privately held, and one is non-profit affiliated.
- 2019 data published by the CDC states that the majority of long-term care facilities are for profit, including 81% of residential care communities. The data also confirms that chain affiliated residential care communities, account for a significant portion of the market ownership at 57.2%.
- The CDC data also notes that in 2016, the U.S. government held about 1.3% of the residential care community, non-profits held 17.7%, and for profit organizations 81.0%.
Senior Living Facilities: Operating Costs
According to the Centers for Disease Control and Prevention (CDC), the expenses senior housing facilities incur vary based on the type of paid care provided and the type of provider or sector, e.g., “adult day services centers, assisted living, home health agencies, hospices, residential care communities,” etc. However, data uncovered from various senior housing facilities market reports and news updates provide insights into the typical expenses incurred by senior living facilities.
TYPICAL EXPENSES FOR SENIOR LIVING FACILITIES
- A recent report by Senior Housing News indicates that labor is the biggest expense for senior housing facilities and accounts for about 60% of their typical operating budgets. Expenses regarding temporary staffing are increasing dramatically in the wake of COVID-19, with agency rates reaching two times higher than the standard rates.
- Market Research notes that in 2019, the average payroll per employee in the assisted living elderly facilities market was $19,103, with some states like California averaging $26,136 per employee.
- Data from the American Health Care Association (AHCA) in conjunction with data from the National Center for Assisted Living (NCAL) provides the typical breakdown of tax expenses for assisted living facilities market.
- The report estimates that assisted living facilities contribute about $3.5 billion in taxes at the state/local level, with federal taxes reaching $6 billion. In total, assisted living facilities contribute an estimated $9.5 billion in taxes to the national government.
- A report by CBRE indicates that some expenses for senior living facilities are tied to occupancy rates and provided as a percentage.
- Based on that assumption, the normal operating expenses rate for a typical senior housing facility is stabilized at 3.5%.
- Core expenses and utilities are also tied to occupancy and stabilized at 4.0% and 3.5%, respectively.
- The expenses for insurance (GL & Property) are based on the current quote or in-place policy coverage and grows at 3.5% per year thereafter.
- Property taxes are based on the current tax bill and increase 3.5% per year thereafter or as each state/county dictates and are based on fixed annual increases.
- According to CBRE, senior living facilities’ management fees are estimated to be equivalent to 5.0% of the organization’s annual revenue.
- On the other end, capital expenditures are estimated at $300 to $500 per unit per year, and highly depend on the age of the property.
Senior Living Facilities: Federal Funding
In the past, senior living facilities in the U.S. were left out of Federal funding; however, with the COVID-19 pandemic, they are now eligible for emergency funding using the same federal relief programs as hospitals and nursing homes.
Federal Funding for Senior Living Facilities
- Senior living communities can now receive relief funding equivalent to 2% of their gross sales revenue from resident care.
- State licensed facilities are eligible to apply for the $18 billion CARES Act Provider Relief Fund Phase 2 General Distribution.
- In May 2019, the U.S. Department of Health and Human Services announced a $4.9 billion targeted nursing home distribution relief fund.
- On average, nursing homes would receive a $50,000 lump-sum payment, with an additional $2,500 per bed. The average distribution per facility ranged from $315,000 to over $3 million for larger facilities.
- According to National Center for Assisted Living (NCAL), low-income individuals can use Medicaid to cover the costs of assisted living services as per their state’s Medicaid programs, which can cover home and community-based services (HCBS), including personal care and supportive services offered at senior living communities.
- Medicaid funds various senior living community services. Equally, Medicaid long-term services and supports (LTSS) spending has moved from “traditional settings of care towards HCBS settings.”
- In 2016, Medicaid spending on HCBS accounted for 57% or $94 billion of Medicaid long term care services and supports expenditure. Likewise, 51.1% of Medicaid spending was via the 1915(c) waiver programs.
- Medicare does not cover long term care services and supports; however, it facilitates the delivery of many Medicare services to seniors in living communities.
- Medicare spending on senior living facilities to cover various Medicare services varies across companies. For example, SavaSeniorCare homes received over $65 million in pandemic relief aid, Brius $35 million, SentosaCare $2 million, Life Care Center of Nashoba Valley $300,000, among others.