The right moves: The retirement home problem
Ireland, like much of the developed world, faces a problem in how to house and finance its growing retired population. Retirement housing however presents both an opportunity for developers and a part solution to our housing crisis.
To understand the sector better, in Florida last week I looked at some schemes and met Craig Smith, Colliers US National Practice Director, Senior Housing and Healthcare.
It's an astonishing statistic but over one third of the retired population in the States live in California, Texas and Florida, continuing a tradition of moving south for warmer weather.
Craig Smith explained that "senior housing" saw a first phase of development from 1977-1983. However inexperienced developers and poor management saw a wave of bankruptcies and the sector gained a bad reputation.
Regulation was needed and Florida led the way. Craig Smith was involved in writing Florida's "Chapter 651", a statute since adopted by 25 other states.
This introduced more oversight and protected funds where projects failed.
There was a fresh wave of development and private schemes were typically 200 units plus a skilled nursing unit. Development evolved into "assisted living" schemes where residents need more care. "Assisted Living" is a "fee for service" model where the resident doesn't pay a lump sum to buy into the scheme but pays a monthly rent and a fee for services as required.
The sector has boomed again since 2003 and most development is in smaller 60-120 unit schemes in the "assisted living" model.
I was surprised to see many schemes in tall blocks, such as the Sarasota Bay Club. Mr Smith explained that the upper end of the market has two sectors - "the beach set" and "the country club set". The former are people used to living in apartments and the latter prefer suburban, low rise campus style developments, often with a golf course.
At the upmarket Sarasota Bay Club, apartments range from 1100-4500 sq. ft. The average cost of buying a unit is $1.5m and residents pay approximately $4,000 per month for meals, housekeeping, security, transport and visits from the on-site nursing unit. Not surprisingly, purchases or rentals are usually funded by the sale of the retiree's original home and/or holiday home, plus pension assets.
Corporations are now also providing their own schemes and Stanford University in California leased 22 acres to a developer. Those 388 "independent living" units are all occupied by retired Professors.
A recent trend sees development catering for two specialised sectors, "physically frail" and "memory impaired." It was realised that residents in the latter category fared better in much smaller schemes, with higher security and far fewer residents and staff. "Familiar faces work best" as Craig Smith put it. Thus, larger schemes, and even individual buildings, are typically divided into independent "neighbourhoods."
The latest trend, especially for smaller towns without the population to support large projects, is to develop 6-12 bed units; either newly built or in converted buildings. Mr. Smith explained that the key to the viability of these is the new concept of the "universal worker." This is one person who is certified and licensed by the State in basic nursing care, but who also carries out light housework and cooking.
With refreshing candour Craig Smith predicts that the development sector will crash in 18-36 months as the national market is being over- developed, well ahead of demographic requirements.
"Retirement housing" has had a nervous start in Ireland but presents a real opportunity for professional developers. Many family homes in Ireland are occupied by one or two retired people who cannot "downsize" because there are no attractive options in their community. Quality retirement housing, whether in apartment buildings or low rise campuses, can be an attractive solution all over Ireland. These schemes can provide independent living, amenities, company, meals and transport.
Many residents will have no need for nursing care but most facilities are available on-site, as required. This means residents can remain in their own home as their health changes, provides an alternative to the dreaded "nursing home" and frees up family homes for the next generation.