Continuing care retirement communities provide lifetime housing and medical-care packages to retirees. But brutal housing and economic realities may be making the industry wish someone was providing it with lifetime care. The housing market meltdown of 2007 and 2008 dried up demand for CCRC living units because potential residents either couldn't sell their homes or sell them for enough money to fund the up-front entrance fees required by many CCRCs. There also are rental CCRCs, but they, too, require a substantial financing commitment over time. In both cases, the sale of a primary residence is the typical funding source for CCRC residency.
As housing woes mounted, the 2008-2009 stock market collapse devastated many retiree investment accounts, removing yet another source of financial support for retirement-community living. And because this bad dream comes in three installments, on came the ensuing recession—the deepest since the Depression—that continues to take a deep toll. Here, the impact may not be so much on retirees as on their family members, who may be facing prolonged unemployment.
"The overall situation has deteriorated," says Jean Anwyll, a marketing consultant to CCRCs. "Many residents, particularly in rental retirement communities, have adult family members who are out of jobs. We are seeing residents actually move out of their retirement communities so they can help their children who have lost jobs." Anwyll's clients are mostly in the East. "I know personally of a dozen communities that have had seniors move out or have not moved in because of their children's situation." The New York area has been particularly hard hit, she says. "It's a small trend, but it's very much there."
Further, with normal demand for CCRCs down so sharply, the people who are moving into these communities appear to be doing so more out of medical necessity than choice. "The people who are moving into independent living units and cottages may not be any older than before, but they are relatively more frail," Anwyll says. Moving into a CCRC should be a "want" decision, she says, but "today, the people who are making the decisions are skewed toward people who are needs-driven."
CCRC occupancy trends show a slow but steady drop since 2007, according to authoritative data collected by the National Investment Center for the Seniors Housing and Care Industry. In 31 major metropolitan areas, NIC's quarterly reports show that entrance-fee CCRC occupancy rates fell from 95.4 percent at the end of the first quarter of 2007 to 91.4 percent in the first quarter of 2009. The decline over the same period for rental CCRCs was from 93.7 percent to 90.4 percent. These are big declines, given that the industry had been reporting high occupancy rates while still adding new communities and living units to the inventory of available slots. More recently, the supply of new facilities has slowed dramatically, and occupancy rates have continued to decline.
Among the 31 markets, the lowest occupancy rates for entrance-fee CCRCs are in Detroit (81.7 percent), Denver (85.8 percent), Dallas (86.5 percent), Tampa (86.9 percent), and Riverside, Calif. (87 percent). The highest areas are San Jose, Calif. (96.8 percent), San Antonio (96.5 percent), Pittsburgh (95 percent), Washington (94.2 percent), and Seattle (94.1 percent). Among rental CCRCs, the five areas with the lowest occupancy rates are Kansas City (79 percent), Tampa (85.5 percent), Cleveland (87.3 percent), Atlanta (87.7 percent), and Dallas (88 percent). The highest occupancy rates are in San Jose (96.8 percent), Baltimore (96.6 percent), San Francisco (95.4 percent), Seattle (95.3 percent), and Pittsburgh (94.9 percent).
As the housing market and economy recover, so will demand for CCRCs, Anwyll says. "There is a fundamental level of demand, and retirement communities don't get built if the demand analysis doesn't show the need for them," she says. "So what we're seeing is that this demand is getting interrupted."
"Right now, consumers can bargain, and they should look for bargains," Anwyll says. For consumers interested in moving into a CCRC, here are the questions to ask to uncover the best deals:
- Many CCRCs will provide real estate services to help get your home ready to put on the market; ditto for downsizing consulting and actual help moving out of the home.
- If you agree to move into a CCRC, will it guarantee to make up the difference between the appraised value of your home and its actual selling price?
- Will it defer your entrance fee for a year or even longer?
- Will the CCRC except a promissory note as the entrance fee pending sale of the home?
- Might it even buy your home and take on the burden of leasing it out until the market improves and a sale is possible?
- How much of a discount can you get on your CCRC entrance fee or on the monthly payments?
- Can you get an extended guarantee that your fees will not be increased?
- Can you get the fee deferred for a year and perhaps even longer?
- Can you get customized and reduced-price meal programs?
- Can you get reduced healthcare expenses?
- Will the CCRC waive penalties should you wish to move out?
- If you do move out or die within a short time, will the CCRC guarantee you or your heirs a refund of your original entrance fee?