Housing for the Elderly Is New Building Trend
For 22 years, Ruth Singer enjoyed living in her own home in Leisure World, Seal Beach, a recreation-oriented community geared to active retirees. But as time took its toll, it became difficult for her even to tend to daily household chores. Her eyesight deteriorated and her heart started to give her trouble.
Now at 87, Singer has sold her Leisure World home and moved into Villa Valencia, a seven-story retirement hotel in Laguna Hills.
Singer doesn’t have to cook or clean her studio apartment. A nurse on duty 24 hours a day can measure out her medications and rush to her assistance in an emergency. The rent of about $1,000 a month covers everything from utilities to cleaning, nursing services and some meals.
Projections of a burgeoning elderly population have awakened developers to an emerging and potentially highly profitable business of providing for the housing needs of an older tier of retirees such as Singer.
The need for high-amenity housing to serve the elderly unable to care completely for themselves is being grasped by conventional home builders and by hotel operators and convalescent home and hospital organizations which are now planning hundreds of new projects nationwide.
Builders are targeting a clientele of persons over age 70 who desire hotel-like accommodations because they are lonely or too frail to live by themselves but do not yet require a nursing home.
According to the Bureau of the Census, by the year 2030 one out of every five Americans will be 65 or older, an age group that comprised only 11% of the national population in 1980. While less than 5% of the U.S. population was 75 or older in 1982, by 2030 almost 10% is expected to fall in that age bracket. And those 85 and older are the fastest growing part of the older generation.
“By the year 2,000 at least 10% of the elderly, or 2.2 million persons, will require housing with support services,” said Michael L. Tenzer, chairman and chief executive of Santa Monica-based Leisure Technology. A pioneer in the development of active retirement villages, Leisure Technology next year plans to open a $40-million project for the frail elderly in Lakewood, N.J.
Just a few years ago, construction of housing for the elderly was almost exclusively the domain of nonprofit, church-related groups.
Improves Finances
But private developers are being enticed not only by the expanding number of elderly, but by their improved financial means. Although the elderly still tend to have much lower incomes than the younger population, demographers say that between 1985 and 1995 the number of households headed by persons aged 65 and over with annual incomes of $20,000 or more will grow by 39%.
“Everybody is looking at the same demographic curves and . . . that is why they are getting excited at the same time,” said Bob Reicher, manager of real estate consulting in the Costa Mesa office of the accounting firm Deloitte, Haskins & Sells, which has conducted feasibility studies on proposed elderly housing projects.
Today’s elderly are reaping the benefits of Social Security and pension plans that were initiated during their working years, analysts said. More importantly, they say, many older persons own free and clear title to houses which vastly increased in value during the 1970s real estate boom. By selling those homes, they can raise funds to pay for a more carefree life style.
Virtually all private builders entering the elderly housing market are designing their product for a portion of the senior population that through a combination of home equity investments, pensions and Social Security have annual incomes of at least $20,000, according to marketing consultants. Rents in the new facilities generally range from about $850 to more than $2,000 a month for private accommodations, and somewhat less for semi-private.
Shift by Builders
Karen Rausch, vice president of Gerontological Services, a Santa Monica-based marketing consultant, said that because the federal program that promoted construction of subsidized housing projects for the indigent elderly was scrapped by the Reagan Administration, builders once active in that program are shifting to a wealthier senior clientele.
Hospitals, hard hit by private insurance and Medicare reimbursement policies that are shortening hospital stays, are also looking with interest at the idea of sponsoring the development of senior housing and convalescent homes to capture a new market.
Plans for the new wave of projects, most of which are still on drawing boards, call for the construction of apartment complexes with special services to help the very elderly--or frail elderly, generally those those over 75 years old--maintain their health, independence and peace of mind. Usually they include extensive security systems, meal service, housekeeping and an array of recreational activities.
Most of the builders are planning stand-alone retirement hotels for the able-bodied elderly. But some also are developing adjacent nursing homes and intermediate care facilities--providing tenants personal help with such things as dressing and bathing--in a campus-like setting.
Although the business of housing the elderly has sparked nationwide interest, the Sun Belt states are leading the way. Goodkin Group, a La Jolla-based real estate advisory firm, predicts that the development of so-called “congregate care” facilities “will be the hottest area of real estate development in Southern California and Arizona through the 1990s.”
Plans to Expand
Ken Agid, a Newport Beach-based real estate marketing analyst, estimates that 25% to 30% of West Coast residential building firms are already mapping plans to expand into the field of elderly housing. One of the most aggressive, Pacific Scenes of San Diego, this year expects to start construction on 14 senior citizen housing projects valued at $150 million.
Professional Community Management, the El Toro firm that manages Leisure World, Laguna Hills, established a subsidiary called Congregate Living Systems earlier this year to help plan and eventually manage retirement complexes with support services. Currently, the firm says it is involved in planning 40 projects for private builders, most of them in California.
Security typically is the strongest selling point of the senior facilities. Individual apartments are equipped with buttons and chords that at a punch or tug will bring help to the tenant’s side. Also important is the ambiance, conveyed by plush landscaping, luxurious furnishings and a smorgasbord of organized recreational activities meant to dispel the musty image of an “old folks home.”
Among the more elaborate complexes under construction is the Remington Club in the north San Diego community of Rancho Bernardo. A spokesman for the developer, Christiana Cos., said that when the facility opens next summer it will pamper its tenants with a limousine service, valet parking, a swimming pool and spa, a 9-hole putting green, maid service, a gourmet dining room and lush landscaping, including bubbling brooks and waterfalls.
The Remington Club will build 146 apartments of various sizes for independent seniors and an adjacent skilled nursing home. Prospective residents will be required to pay an entry fee ranging from $98,000 to $243,000, about 86% of which is refundable. And they will make monthly payments of $982 to $2,395.
Participate in Planning
Robert Weiner, a retired real estate investor, gave the University of Southern California a $300,000 grant to work with local senior citizens in designing a state-of-the-art retirement hotel that he hopes to build in Beverly Hills, contingent on the city’s approval. He plans to construct an 82-unit complex that will feature apartments with full kitchens and balconies, an indoor swimming pool, and a skylighted “main street” of convenience shops and services on the ground floor, complete with indoor trees and park benches.
Some hotel and convalescent home companies say they also view housing for the elderly as natural extensions of their business. Carole Trimble, spokeswoman for Beverly Enterprises in Pasadena, a builder of convalescent homes, said the firm is moving full steam into the elderly housing market. She said it has embarked on plans to build 33 independent living and semi-support facilities a year throughout the country.
Marriott Corp., a major hotel developer, is making its debut in the elderly “life-care” market with plans to build three projects over the next four years, with the first project near Washington. A life-care plan guarantees medical care and shelter for a specific period for a fixed fee.
In search of affluent seniors, some developers are building retirement hotels adjacent to existing retirement communities such as Arizona’s Sun City and Leisure World, Laguna Hills.
Already, however, some consultants fear that the Sun Belt may quickly become saturated with senior housing. “In general I think there is a lot of craziness out there. I think the whole mania will result in a lot of overbuilding,” said Victor Regnier, an associate professor of architecture and gerontology at USC.
Will Be Overstocked
“I give it three years and it (senior housing) will be overstocked in the Sun Belt states,” said Rod Sherod, president of PCM’s Congregate Living Systems.
To avoid the crowd, some builders instead are targeting projects in the East and Midwest. They are responding to studies that show people who initially retire to the sunny climes of Arizona, California and Florida often move back to their home towns to be near their family when their health deteriorates.
Terry Scott, president and chief executive of Alexian Bros. Health Management, which develops and manages health facilities, said when that organization opened its first life-care housing project for the elderly last year in Chatanooga, Tenn., it attracted quite a few residents from California, Arizona and Florida who wanted to be closer to children living in such cities as Cleveland, Chicago and Philadelphia.
In the coming fierce competition among developers of elderly housing, real estate analysts predict that those who survive will have the projects that are best designed and managed.
Jerry T. Quigg, director of retirement center and health care advisory services in the Los Angeles office of Laventhol & Horwath, said he discourages “merchant builders” who want to quickly develop elderly housing projects and then sell them to someone else to operate.
“This is definitely a develop, build and hold type of product,” said Quigg. “Once you talk about selling a facility, that would be very upsetting to residents.”
Unfamiliar Process
The process of planning senior housing is unfamiliar to most builders, Quigg said, who rapidly learn that it is fraught with problems, not the least of which is finding experienced managers, architects and interior designers.
Regnier of USC said he is concerned about projects that provide only tiny hotel-like rooms without kitchens. That design will force residents to eat three meals a day in a dining room and impose a regimented life style that is attractive only to the very elderly, he said. Regnier predicted that over time, such facilities may degenerate into “bootleg nursing homes” without the availability of proper medical services.
Advocates of retirement hotels for the elderly say that such facilities can prolong the independence of elderly persons and in some cases forestall a dreaded move into a convalescent home. They say the hotels offer a life style of safety, security and sociability especially beneficial to elderly persons who have begun to neglect their diets or feel isolated.
Still, some market analysts expect that a large number of the housing projects for elderly on the drawing boards will never be built. The least financially sound projects, they say, will be weeded out by discriminating lenders, who are well acquainted with the potential pitfalls of such ventures.
Fresh in the lenders’ memories is the 1977 bankruptcy of Pacific Homes, a nonprofit developer of life-care facilities, including five in California. The financial woes of Pacific Homes, which since has worked out its problems, illustrated the difficulty of predicting the future cost of service and life expectancy of elderly tenants.
Entrants Are Gamblers
“People who enter the life-care community basically are gamblers of sorts,” said Quigg of Laventhol & Horwath. “If you are the developer and I am the consumer, I’m betting I am going to live and you are betting I’m going to die. That’s what it amounts to, to put it bluntly.”
Under its life-care arrangement, Pacific Homes originally had required one lump payment from those who moved into its facilities. In turn, the corporation promised to take care of the housing and nursing needs of its residents for the rest of their lives. But the residents lived longer than expected and medical costs rose more quickly than expected and the money ran out.
Since the Pacific Homes debacle, most owners of elderly housing projects have refused to guarantee lifelong medical care for a flat fee paid in advance. And many potential life-care customers have been scared away, although the state has toughened regulations governing such life-care projects to try to protect elderly consumers from financial loss.
As an alternative, many builders of elderly housing projects, even those who plan to construct health-care facilities in conjunction with retirement hotels, intend to rent out apartments on a month-to-month basis. Although some facilities still require a substantial up-front fee from new residents, they also reserve the right to increase monthly “service charges” in relation to the cost of living and to charge more for any medical services.
Need Hefty Backing
Housing analysts and government officials warn that residential projects for the elderly need hefty financial backing to pay the bills until they fill up. Quigg of Laventhol & Horwath said typically it takes 18 to 34 months before a private project for the elderly is fully leased. Government subsidized projects, in comparison, are generally booked solid before they open.
For lack of sufficient start-up funds, La Serena Retirement Village in Thousand Oaks and Faith Gardens in Vista currently are in default to their lenders, according to Bob Bishop, manager of life-care contract programs for the State Department of Social Services. La Serena said it was attempting to reorganize its debt. Faith Gardens declined to discuss its financial problems.
Regents Point, an attractive combination residential and nursing facility in Irvine operated by Glendale-based Southern California Presbyterian Homes, opened in 1982. So far it’s only 80% full. S. Arthur Harker, the nonprofit corporation’s vice president of operations, acknowledged it is not easy to sell the concept of congregate living to elderly, especially to those with financial means who can afford to procrastinate.
Most people “are hoping that they will die with their boots on. That they will be in their own little homes and a lightening bolt will strike,” he said.
But Marion Broer, at 74 one of the youngest at Regents Point, said she doesn’t regret selling her place in the northern San Diego County community of Rancho Bernardo. She said she had watched some of her Rancho Bernardo neighbors become homebound and lose social contacts. At Regents Point, she said, “It’s like living in a big club. . . . It’s like you’re part of a family.”
