Developers See Market in Housing for Seniors : Construction: Instead of full-service complexes, builders are working on more affordable apartment projects.
As a society, we don’t like to hear about wrinkles, gray hair and achy-breaky joints. But when time comes to face facts, we all know it’s true--America is getting older.
And even in upscale Orange County, as countless marketers to the aging discovered during the 1980s, the “golden years” don’t always glisten, especially for older residents faced with high housing costs.
For much of the last decade, the buzzwords were congregate care and assisted living--two of the most expensive types of housing available to senior citizens who are either unwilling or unable to live on their own but aren’t ready for a skilled nursing facility.
Relatively few among the county’s older residents can afford monthly rents of $1,200 to $2,000, however, so builders have begun looking to a less comprehensive but potentially more rewarding type of senior housing--the affordable apartment.
Early indications are that a boomlet is in the making.
The affordable apartment is for independent living. In many cases, the facilities simply do away with the community kitchens, dining rooms, ongoing transportation, entertainment programs and other features of a congregate-care or assisted-living development. In others, builders locate the apartments near existing congregate or assisted living units to piggyback onto the services they provide.
More than a dozen senior apartment complexes are in the works or on the drawing boards in the county, most targeted for the coastal and southern areas. The older, more developed northern and central parts of Orange County contain most of the approximately 3,500 senior apartments that already exist.
Using more readily available private investment funds or government financing programs instead of hard-to-get conventional construction loans, builders hope to unleash what they believe is a pent-up demand for units with monthly rents in the $400-$750 range, said industry analyst Annie Gerard.
One of the premier players in the new market is Birtcher Senior Properties, a unit of the Birtcher group of companies in Laguna Niguel that builds and runs its own congregate-care properties and manages others for their investor-owners.
With several congregate-care facilities under its belt, Birtcher Senior is shifting focus to what company President Baron Birtcher calls the “affordable independent living” market.
Its first venture is Inn at Laguna Hills, which is being converted from a failed congregate-care facility just outside the gates of the Leisure World retirement community. Rents for the studio and one-bedroom apartments will run from $495 to $695 a month. Though the project won’t open until March, 125 of the 138 units have already been reserved.
The project is attractive to many potential renters because Birtcher has obtained private financing and doesn’t have to subject residents to the income checks and other qualifying procedures that accompany low rents in projects financed under various state, local and federal government funding programs for affordable housing.
Another plus is that, by acquiring a distressed property at a discount price, Birtcher has been able to set rental rates that compete with rent-controlled, government-financed projects.
The company also picked a location that is in an area with a large senior citizen population, has no other independent, privately financed affordable senior apartments and is close to medical services, entertainment and shopping centers--all marketing pluses.
But the Birtcher project offers one other amenity as well--one that pushes it well out onto the cutting edge of the industry, said Gerard, who oversees the senior housing scene for Market Profiles, a Costa Mesa real estate consulting company.
The company is negotiating to lease 10,000 square feet in another building on the site to South County Senior Services, a nonprofit community agency that provides home health care, low-cost meals, in-home meal delivery and in-home assistance for non-medical needs.
Residents of Birtcher’s Inn at Laguna Hills would be able to afford themselves of the agency’s services on their own terms--using only what they want and paying for only what they need.
It is not a congregate-care or assisted-living facility, where all services are included in the monthly rent and are paid for whether they are used or not.
“Instead, I call it the K mart of congregate,” Gerard said. “Birtcher is providing housing and the availability of some nice services at prices that can be handled by people who can’t afford congregate.”
While congregate-care projects add amenities like meal service, housekeeping, entertainment and transportation to the provision of housing, assisted living goes a step beyond that to provide basic hands-on care, such as assistance with bathing and grooming, and supervision and dispensing of medication.
“There were a large number of congregate-care facilities built in the U.S. in the 1980s, and many of them have gone under,” said Kenneth J. Rhode, a Huntington Beach architect and president of the Seniors Housing Council of the Building Industry Assn. of Southern California.
“There have been some very successful ones too,” he said, “but a lot were unsuccessful because the developers didn’t understand the market. They expected healthy, active 65-year-olds to move in, when the average really is 75 to 80.
“People don’t come into congregate care or assisted living until there is some health event in their lives that makes it necessary, and many builders didn’t see that,” Rhode said.
What they also didn’t see is that while lifestyle is important to senior citizens, affordability is critical.
The expensive congregate and assisted-living projects, which often advertise that they offer “resort-like” living, are accessible only to the top 3% to 5% of senior citizens because of their high rents, Baron Birtcher said.
He should know. Near Inn at Laguna Hills is Birtcher Senior Properties’ pricey Wellington complex, a congregate-living apartment community where rents start at $1,850 a month.
“We will continue to be in that market,” said Terry Howard, executive vice president of Birtcher Senior Properties. “But our focus for the 1990s is value-driven products. And right now that is affordable independent senior apartment.”
The target clientele for Inn at Laguna Hills, Birtcher said, is senior singles or couples with annual incomes of $12,000 to $20,000. He said that the company wants to build “three to four projects a year, some rentals and some for-sale housing” and is looking at real estate from San Diego to Monterey.
Although one of the first to hit the market with an affordable independent-living apartment complex, Birtcher isn’t the only player in the Orange County market, where 1990 census figures show that almost 10% of the population--219,000 people--are 65 or older and an additional 183,000 people are jammed into the 55 to 64 age group.
American Retirement Villas in Costa Mesa has a 135-unit complex under construction in Anaheim. William Lyon Co. has included an 83-unit apartment building in plans for a larger planned community on the site of a former golf course in Orange. A Beverly Hills builder, Jan Development, has been trying to get a 335-unit Stanton development off the ground for most of the last year.
Even the Irvine Co., one of the county’s largest apartment developers, reportedly has plans on the drawing board for several affordable senior apartment complexes in Irvine and Newport Beach.
“There’s a huge demand,” said Rhode, “and it is likely to be several years before it all levels out.”
One indication, he said, is that the number of entries in the affordable segment of a national senior housing design competition has quintupled in three years.
“We had three or four entries in the affordable category when the competition began (in 1990), we got 15 entries this year,” said Rhode, who organized the senior housing contest as part of the National Home Builders’ Assn. annual design competition.
“I see it in my own practice too,” he said. “There aren’t too many developers out there planning a Wellington right now.”
Senior housing specialists warn, however, that despite the high level of demand, the market will level out. There is a danger of overbuilding--as happened with the office market and the luxury tract home market--unless developers temper their appetites for profit with knowledge of the senior housing niche.
“The demand exists because everyone was specializing in expensive senior projects and ignored the affordable market for so long,” Gerard said. Once the initial hunger for reasonably priced homes and apartments is satiated, demand will stabilize.
And while the number of senior citizens is growing, most don’t want to live in age-segregated communities, Rhode said. Most don’t even want to live in apartments.
In a recent nationwide survey by the American Assn. of Retired Persons, 85% of all senior citizens said they preferred to live on their own and only 6% said they lived by their own choice in homes or apartments specifically designed for older people.
That small percentage, though, is still a healthy segment of the market, senior housing specialists said. For companies that truly specialize in that market, they said, building affordable housing for senior citizens can remain a healthy business.
More Housing for Senior Citizens
Orange County has 37 existing senior citizen apartment complexes totaling 3,344 units. The total includes three projects completed in the past year and three more under construction. Six proposed complexes would add nearly 1,000 units.
COMPLETED THIS YEAR:
Complex Location Developer Units Cypress Pointe Cypress Hyter Development 110 Palacio Anaheim Hills Trider Corp. 117 Five Points Senior Villas Huntington Beach IPI 164
UNDER CONSTRUCTION:
Complex Location Developer Units Anaheim Senior Villas Anaheim American Retirement Villas 135 Amerige Senior Apts. Fullerton Doug Chaffee 59 Inn at Laguna Hills Laguna Hills Birtcher Construction 138
PROPOSED:
Complex Location Developer Units Inn at Woodbridge Irvine Jamboree Housing 128 Proposed development* Irvine Wang Partnership 208 Rose Gardens Westminster Elderly Development 133 Tustin Plaza Santa Ana Plaza Development 80 Park Stanton Place Stanton Jan Development 335 Sycamore Crossing Tustin William Lyon Co. 83
*Not yet named
Source: Market Profiles; Researched by JANICE L. JONES / Los Angeles Times
