Economic Outlook: seniors housing and healthcare sector

Insights presented at the 2022 NIC Fall Conference in Washington, D.C., September 2022

<p>Economic Outlook: seniors housing and healthcare sector</p>

Demographic trends contribute to growing demand for senior living facilities and services despite economic headwinds.

With inflation reaching historic levels and volatility intensifying in the financial markets, businesses in every sector of the economy face unprecedented challenges. The seniors housing and healthcare industry is no exception. Yet despite turbulence in the near term, the long-term outlook for these businesses is positive, thanks largely to growing demand based on demographic trends.

At the 2022 National Investment Center for Seniors Housing & Care (NIC) Fall Conference, Jason Schenker, President of Prestige Economics and Chairman of The Futurist Institute, presented a deep dive into the current economic and financial market outlook for the fourth quarter of 2022 and beyond. Here are some of the key insights and takeaways for business owners and operators, investors and other stakeholders in the seniors housing and healthcare industry.


Demographics: a double-edged sword

The first Baby Boomers will turn 80 in 2026. That same year, members of Gen X will enter their early sixties and the eldest Millennials will be 45. As these segments of the population get older, demand for seniors housing and healthcare facilities will increase—which is good news for the industry in the long term. But in the short term, with Baby Boomers retiring and leaving the industry, their departures prolong the staffing shortages at these facilities that intensified during the COVID-19 pandemic.


As staffing shortages persist, labor costs increase

Seventy-seven percent of U.S. workers over the age of 65 who left a job in the first quarter of 2022 exited the workforce entirely—in other words, retired.1 Following the blows dealt in recent years by COVID-19 outbreaks and the Great Resignation, older workers exiting the seniors housing and healthcare industry is contributing to the ongoing labor shortage in the sector.

In a survey conducted by the American Health Care Association in May of 2022, only 2% of respondents reported that their nursing homes were fully staffed, and almost all those surveyed (98%) said they were having trouble hiring staff.2 In Key’s own survey conducted ahead of the NIC Fall Conference, more than three-quarters of respondents selected staffing as a major obstacle their organization faces over the next 12 months3.

Shifts in the labor market have diminished the number of younger workers entering the industry to fill the jobs left by retiring older workers. According to Schenker, unemployed members of younger generations are more inclined to work as independent contractors for ridesharing or delivery apps than to seek employment in memory care or assisted living facilities. He also notes that workers affected by recent layoffs in technology and other white-collar professions—many of whom have become accustomed to working from home—are similarly unlikely to apply for physically demanding, in-person jobs in seniors housing and healthcare facilities.

Due to spiking demand for labor in a variety of industries, employment costs have gone up across the board, and are likely to remain high as long as inflation persists. Private sector wages and salaries increased 5.7% year-over-year in the second quarter of 2022—but that’s not enough of an increase to keep up with current rates of inflation.4 As a result, Schenker says, workers are changing jobs in search of higher salaries. Sixty percent of workers who switched jobs between April 2021 and March 2022 saw real wage gains.5 In the context of seniors housing and healthcare facilities, which require extensive training and experience working with delicate patients, high turnover can severely impact operations.

The median annual wage for health aides and personal care aides—both critical roles in assisted living and memory care facilities—was about $27,000 according to data from the Bureau of Labor Statistics. The cost of recruiting and retaining these workers has already increased and will continue to rise as labor demand persists.


Inflation causes increases in operating costs, slowdown in new facility construction

The Consumer Price Index increased 8.3% year-over-year in August of 2022.6 This reflects the highest rate of inflation since December of 1981. As a result, the Federal Reserve is continuing to raise interest rates, with the most recent increase of .75 percentage points announced on September 21. Commodity prices are also rising, due in part to Russia’s war in Ukraine constraining global food and energy supplies.

The combination of higher interest rates and higher prices for commodities and energy has multiple implications for seniors housing and health care. First, it means operating costs will increase, especially as facilities turn on the heat this winter. Second, elevated costs for materials and labor will cause a slowdown in the construction of new facilities in the coming months, which means that as demand ramps up over the next few years, supply will hold steady rather than increase to meet the growth in demand.


Homes are hard to sell, but mortgage credit is strong

Older Americans often rely on proceeds from the sale of a home to fund living expenses in an assisted living, memory care or other seniors housing facility. As a result, mortgage rates and home prices have implications for the seniors housing and healthcare sector. As the Fed raises interest rates, mortgage rates are climbing to levels unseen in many years. As a result, both home sales and new housing starts have fallen, says Schenker.

On the bright side, even though housing is under pressure and demand could fall further, the quality of outstanding mortgage credit is strong, with most mortgage originations going to borrowers with credit scores of 760 or higher. Ultimately, Schenker explains, this amounts to a “lesson learned” during the 2008 financial crisis, and the high quality of today’s mortgage credit means there is unlikely to be a crash in the housing market, even if the economy does enter a recession.


Key takeaways for seniors housing and healthcare businesses

When it comes to navigating the current economic and financial landscape, Schenker offers the following recommendations to businesses in the seniors housing and healthcare industry:

  1. Minimize costs where possible. Revisit vendor agreements and make other adjustments to reduce spending where you can.
  2. Plan ahead for “sticky” inflation. Rather than raising your residents’ rates every month or two while inflation persists, anticipate that costs will remain elevated and plan accordingly.
  3. Be cautious with speculative investments.
  4. Focus on operational resilience. Whether it’s stocking up on PPE to avoid future shortages, or fortifying facilities against severe weather and other environmental issues, take action now to prepare for disruptions and ensure business continuity.

Economic headwinds related to inflation and rising interest rates, labor shortages and geopolitical conflict have created a challenging landscape for seniors housing and healthcare over the next two to three years. But growing demand for these facilities based on demographic trends will generate significant opportunity in the sector for those equipped to ride out the storm.

As one of the nation’s leading lenders in the seniors housing sector, KeyBank Real Estate Capital offers an integrated approach backed by a national platform.


To learn more

Contact Kevin Murray and Matt Ruark, or reach out to your mortgage banker.



Pew Research Center, “Majority of U.S. Workers Changing Jobs Are Seeing Real Wage Gains.” July 28, 2022. 


American Health Care Association, “State of the Nursing Home Industry: Survey of 759 nursing home providers show industry still facing major staffing and economic crisis.” June 2022.

3, “Survey reveals top concerns and opportunities for senior living.”


St. Louis Fed, “Employment Cost Index: Wages and Salaries: Private Industry Workers.” July 29, 2022


Pew Research Center, “Majority of U.S. Workers Changing Jobs Are Seeing Real Wage Gains.” July 28, 2022.


US Bureau of Labor Statistics, “Consumer Price Index – August 2022.” September 13, 2022.

This document is designed to provide general information only and is not comprehensive nor is it legal, accounting, or tax advice. Banking products and services are offered by KeyBank N.A. Member FDIC and Equal Housing Lender. All credit products are subject to collateral and/or credit approval, terms, conditions, availability and subject to change. is a federally registered service mark of KeyCorp.

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