Future shock
Henry Ford joked a century ago that consumers could buy his cars in any color they wanted, “so long as it is black.” 
Similarly, those in need of seniors housing and care options historically had but one real choice: nursing homes.
But market changes and policy shifts have collectively reduced the role of nursing care as the nation’s pre-eminent eldercare option. In fact, a new report suggests that the tipping point when SNFs will no longer be the dominant player may be less than a decade away.
The 2008 NIC/ASHA Seniors Housing Construction Trends Report was unveiled last month at the National Investment Center for the Seniors Housing & Care Industry’s 18th annual conference. The study reveals properties under construction as of March 2008 in the nation’s top 100 metropolitan markets. 
One of its unmistakable findings is that while the number of independent living, assisted living and memory care settings have grown dramatically over the past two decades, nursing homes simply have not kept pace.
“We will reach a point, maybe in 10 years, where skilled nursing will no longer be the primary segment in terms of size. Instead, it will be independent living,” said Robert G. Kramer, president of NIC.
Historic perspective
Kramer noted that the latest report offers a first-ever history of inventory growth. In fact, new construction increases can be tracked as far back as 1985. 
The figures reveal several compelling trends. One is that recent downturns in the nation’s economy appear to have had a universal tamping down effect on new building. 
“We are starting to see a slowdown, both in terms of units under construction compared to existing inventory, as well as new starts,” Kramer said. So it shouldn’t come as much of a surprise that median growth in four key sectors–independent living, assisted living, memory care and skilled care–was right at 2% for 2007.
Overheated development
Another revelation is that recent cries of overheated development appear to have little real merit. Relative to existing supply, the amount of new construction taking place in recent years pales in comparison to what was seen in the late 1980s’ for independent living and the late 1990’s for assisted living and memory care. 
For example, new construction for independent living properties  hit 11.6% in 1987. For assisted living, the high water mark of 14.4% was achieved in 1998. For memory care, an even more impressive 25.6% growth rate took place during 1998. However, it should be noted that the memory care sample size is comparatively small.
The third in-your-face trend is that a flat nursing homes growth market is hardly a new development. The report shows that annual growth rates have never exceeded the 4.5% peak seen in 1989. For most of the past decade, growth has hovered at or below 2%.
Moreover, many of the 16,000 or so remaining facilities are re-inventing themselves to better compete against rehabilitation hospitals, assisted living communities and memory care settings. 
The result is a far less homogenous SNF sector than was the case a generation ago. 
Expanded coverage
“This year’s report expands the number of metropolitan areas it covers,” said David Schless, president of the American Seniors Housing Association. 
“We are now covering construction in the country’s 100 largest metro markets. According to the latest figures from the U.S. Census Bureau, these 100 markets contain approximately 65 percent of the total United States population, 62 percent of those ages 65-plus and 61 percent of those 75 and older.”
He said that of the most popular features of the report is a year-over-year comparison of construction activity by property type, which is expressed as a percentage of inventory. For example, the independent living sector experienced a decline in construction from 4.6% to 4.4% of inventory. As of March 31, 2008, there were 16,490 independent living units under construction, of which 12,030 were new starts that began in the previous 12 months. And of the 16,490 units under construction, 8,121 were in continuing care retirement communities–both rental and entrance fee.
Additionally, the report includes information on the net growth in supply by sector from 2002-07 for the top 10 markets, a summary of construction activity compared to existing supply, a comparison of entrance fee and rental CCRC units under construction, and more. 
There are also metro market rankings by the number of properties under construction and the number of new units/beds under construction.
“This report provides a valuable snapshot of overall seniors housing construction activity based on verified counts,” said Lawrence J. Horan, Ph.D., financial research and analysis director for NIC. 
He said the report summarizes data gathered from a variety of sources, including the NIC Market Area Profiles (NIC MAP®) data and analysis service and from McGraw-Hill Construction, as well as through additional verification at the local level.
More change coming
Kramer predicted that the seniors housing and care sector will continue to diversify while it targets a growing part of society. He noted that older Americans could soon be spending up to 25 years in such settings.
An NIC survey of older adults released last year suggests that such a prediction is hardly far-fetched.
Results showed that the number of seniors who have moved to age-qualified housing has increased significantly since 1998. 
Fully 12% of age 60-plus households in 2007 indicated that they lived in housing “planned specifically for people at least 55 years of age” compared to 7% of respondents in 1998. 
In particular, those 75-plus years of age appeared to be moving from their primary homes at a higher rate than previously seen. The average “tenure of current residence” among this age group was 24 years, down from 27 years in 1998. Fully 19% of the 75-plus households stated they lived in an age-qualified community in 2007.
In the same period, the proportion of age 60-plus households who preferred age-qualified housing to an all-age community or who would consider moving to either type of community more than doubled. Thirty-seven percent of households in the 2007 study preferred or were willing to consider age-qualified housing, up from 18% in 1998. Nine percent of age 60-plus households said they had decided to move to an age-qualified property in the future, which is more than double (4%) indicated in 1998.