Friday, April 19, 2024

Retirement living energizes the state’s housing market

Retirement living options abound across North Carolina, attracting newcomers and hefty investments from corporations and not-for-profit housing groups.

Attracting people to move to Brunswick Forest, a master-planned community near Wilmington for adults age 55 and older, isn’t overly challenging these days. Hordes of retiring baby boomers and others long for the coastal lifestyle. Fifty lots sold in January, 20 more than in a typical month. President Jerry Helms says he expects 400 to 500 sales this year.

Unfortunately, getting homes built on those lots is frustrating Helms. The typical six-month construction process now stretches to nine or 10 months because of worker shortages and delays in deliveries of windows, doors and appliances.

 “As soon as we get new lots on the ground, our builders are starting homes, and those homes are selling before they’re ever complete,” Helms says. “It’s a great problem to have, but if we had stock on the shelves, so to speak, and weren’t selling just-in-time inventory, we could really have 500 to 600 sales per year.”

“When a builder has to wait 22 weeks for a window to go into a home,” he adds, “that slows the whole process down.”

Started in 2007, Brunswick Forest is now one of the state’s fastest-growing communities, with an expected 8,000 homes when completed over the next decade. It is part of the boom-time experienced by North Carolina’s senior housing industry, which ranges from quaint villas and neighborhoods built for active retirees to nursing homes and health care-centered options for seniors requiring more hands-on attention.

With a diverse geography of beaches and mountains, a moderate climate and a pivotal location bridging the North and South, North Carolina is a favorite choice for many retirees across the nation. The Census Bureau estimates that 639,000 more people moved to the state than left between 2010 and 2019, which is more than in any neighboring state. 

Coupled with internal growth, demand for senior housing looks to be a long-term trend. North Carolina’s 65-plus population is expected to grow by 56% by 2035, while the number of 85-plus residents will more than double, according to N.C. State Demographer Michael Cline. The state already has 2.1 million residents who are at least age 65, up from
1.2 million in 2010. More than 110,000 North Carolinians turn 65 years old annually.

A low cost of living, access to medical care and tax-friendly policies are the top reasons retirees move to the state, says Andre Nabors, partner relations manager at Visit North Carolina, the state’s tourism promotion agency. Meanwhile, senior housing providers are finding success with active-adult developments across the state.

▲ Brunswick Forest is about a 10 minute drive to historic downtown Wilmington.

“They promote that you will have an instant friend group of like-minded people of the same age. These are residents that have all moved from other places, had their children leave home and are looking to enjoy their golden years,” Nabors says. “The coastal region is still the primary destination, but the mountains and Asheville region, as well as urban areas like Charlotte and Raleigh, are still popular. Outlier towns are becoming important because of their proximity to major cities, health care and amenities.”

A big part of the senior housing landscape is the 62 state-licensed, continuing-care retirement communities, which generally include independent living, assisted-living, and skilled nursing care and services. CCRCs house about 22,000 residents, according to Raleigh-based LeadingAge North Carolina, an association representing about 70 senior living communities.

Over the next decade or so, those numbers are expected to increase to more than 35,000 residents, according to a 2015 study by UNC Chapel Hill’s Kenan Institute of Private Enterprise. The communities, of which about 40 are owned by not-for-profit groups, pay about $174 million in annual state and local taxes and $283 million in federal levies and employ more than 10,000 workers.  

Five new continuing-care communities are under development in Asheville, Charlotte, Hendersonville and Raleigh, while a dozen others are expanding, according to the N.C. Department of Insurance.  

The senior housing landscape encompasses everything from retirement communities, independent living centers, and assisted living facilities to nursing homes, adult-care homes, and memory-care homes. Many of the nation’s leading senior housing providers are heavily invested in North Carolina, including Brookdale Senior Living, Sunrise Senior Living and PulteGroup, which owns the Del Webb communities. 

While those for-profits have a substantial market share, nonprofits were dominant until the 1990s, says David Segmiller, principal at the Charlotte office of the Hord Coplan Macht architecture firm. The state’s Methodist, Lutheran and Presbyterian denominations started more than 20 communities across North Carolina.

 “It’s a much bigger industry and more connected than a lot of people understand,” says Segmiller, who has worked with senior-housing developers for more than three decades. Early to the scene was Charlotte’s Aldersgate United Methodist Retirement Community, which started in the 1940s as a place for retired Methodist preachers and widows. Now, the 231-acre campus totals about 560 residents and provides at-home services, assisted living, memory care, long-term care and rehabilitation services. It reported $41 million in revenue in 2020, according to its latest state disclosure statement. 

“There weren’t a lot of for-profit developers doing it aside from ‘mom and pop’-type providers that had one assisted living community, maybe two,” Segmiller says. “Then Sunrise entered the market and started building all over the country, and other developers copied that. A lot of money in real-estate investment trusts made it into the business.”

Limits to growth

Senior housing in North Carolina would be developing even faster if not for labor shortages and regulatory issues, industry observers stress. In March, The Charlotte Observer  produced a report noting that only one of five N.C. nursing homes meets the staffing threshold recommended by a major federal study. Moreover, the state doesn’t even require minimum staffing ratios for nursing homes, which typically scramble to retain workers who can often make more money at warehouse or restaurant jobs. The series cited examples
of horrible care for residents because so few staffers were
on the job.

“The COVID pandemic has made [staffing challenges] many multiples worse, but the issue of finding service-sector employees was growing, and now things are as frustrating and difficult as we have ever seen,” says David Ammons, whose Raleigh-based Retirement Living Associates owns senior communities in the Carolinas, Georgia and Florida. “We’re currently hiring in almost all departments at all of our communities in North Carolina and Florida. We have openings such that a call out or two can really create a crisis.”

It’s a problem likely to linger for years as demand for senior housing expands, says Tom Akins, CEO of LeadingAge. “The first baby boomer turns 75 this year, and nearly 11,000 are turning 65 each day. The average age of entry to a CCRC in this state is around 82, meaning the staffing challenges we face today won’t even peak for another seven years,” he says.

Then there’s the state’s strategy to control the market for health care-related facilities. The intent is to promote efficiency and avoid excess capacity that drives up costs and causes financial tumult that hurts consumers. Certificate of Need regulation, or CON, is a topic that has set off sparks since state lawmakers enacted regulations in the 1970s.

A 2015 report from George Mason University’s Mercatus Center rated North Carolina’s CON program as the fourth most restrictive in the U.S. It concluded that when state governments restrict competition, health care costs accelerate for some while enabling existing medical providers to use their profits to boost care for the poor.

“We could build a lot of assisted-living facilities if they’d just let them have the beds,” says Segmiller, referring to state regulations around licensing special care units. “It turns off a lot of people I know. I have developer friends that want to come to North Carolina and see the market, but they can’t get beds, so they won’t come. So, who’s getting hurt? The people that live here.” 

▲ David Ammons owns Raleigh’s Retirement Living Associates.

David Ammons, whose company employs more than 700 people, thinks the government’s control is excessive. “In my opinion, where an assisted living or skilled nursing facility will be privately funded and built, and the clients will be private pay, the CON process serves little to no purpose.”

Not everyone shares that view. North Carolina is protecting customers by limiting skilled-nursing home growth because more seniors are being served at home or in assisted-living facilities, says Perry Aycock of Longevity Markets, a Chapel Hill consultancy. “Overall trends show lower nursing home utilization, despite the demographic growth for the ages that have historically needed those services.”  

Challenges to CON regulations are a perennial topic at the N.C. General Assembly, but House Speaker Tim Moore and other top lawmakers say major changes are unlikely in this year’s session.

While nursing homes and assisted living facilities are regulated by the N.C. Department of Health and Human Services, continuing-care retirement communities are scrutinized by the state Insurance Department. Each year, they have to provide a financial disclosure statement, including whether their reserves are in compliance.

“We have been fortunate in North Carolina that the regulatory environment for CCRCs has really been the model for states around the country,” LeadingAge’s Akins says. “Because of our reporting requirements and our operating reserves, North Carolina has a set of very financially secure CCRCs, safeguarding consumer interests.”

Creative business models

Demand is growing for more creative approaches to pay for senior housing. It is too expensive for many in North Carolina, where the 65-plus crowd has a median annual household income of less than $42,000. Depending on the size and type of living unit, CCRC entrance fees generally range from $68,000 to $370,000, though more elaborate locations charge $1 million or more. Monthly fees typically fall between $2,000 and $4,000 but can top $8,000, according to the Department of Insurance.

In-home care is also pricey; the median cost of home health aide and homemaker services in North Carolina last year was $4,385 per month, according to insurer Genworth Financial. 

Many seniors prefer to own their retirement units, says Ammons, who is developing the Legacy at Mills River CCRC near Asheville as 100% member-owned. The development was conceived more than 15 years ago but was slowed by the 2008-09 recession. Now it is slated to open in 2024 with 210 units in its first phase, with members investing from $400,000 to more than $1 million. They will retain the tax benefits of homeownership, according to the development’s website. 

Another emerging segment is at-home services, which allow people to plan ahead for finding and managing care when it’s needed. These programs can be cheaper than traditional long-term care insurance. Moreover, about 77% of adults who are 55 or older say they want to stay in their homes long-term, according to AARP research.

▲ Brookdale Senior Living has more than 60 locations across the state.

Navigation at Home, for example, was launched in 2014 by the Salemtowne Life Plan Community in Winston-Salem. It is billed as combining “long-term care insurance with geriatric care management.” Program director Liz Brescka Hipsher says membership increased 25% last year to more than 100 people in the Triad.

“Most of our new members are people that we had been talking to for several years but previously told us they weren’t ready yet to make a decision,” Hipsher adds. “With the increase in long-term care insurance premiums, Navigation at Home is an alternative to paying for future care.”

Aycock of Longevity Markets says the data from similar programs indicates that more than 95% of program members never enter long-term care facilities. This is playing out for Navigation at Home: Only 2% of its membership receives regular long-term care in their home, according to Hipsher. “Most of our utilization has been for short-term care in the home after events such as hip surgery, knee replacement or injury due to a fall.”

Just as quickly as they burst into this world, baby boomers will be the largest generation to fade out of it — but not without a fight. Experts have warned of a long-term care crisis by 2050, when 27 million Americans are expected to need such services, up from 13 million in 2000.

“Community and program development take time, and there will be a supply issue that extends beyond the workforce and construction materials challenges of the past two years,” Aycock says. “Every form of age-targeted housing and services will enjoy these challenges in the coming decades and those opportunities will create new models and new market leaders.”

Related Articles