What We’re Talking About: How Will Economic Challenges and Inflation Disrupt Senior Living?

We are excited to introduce a new blog series where Sherman & Roylance senior living experts will weigh in on the latest headlines and trends impacting the industry. Since the pandemic began, there have been numerous economic, fiscal, and societal challenges that have contributed to uncertainty within the industry. Not only did construction of future developments come to a halt, but operators and providers have had to remain agile and adapt to labor shortages, changing housing models, fluctuating rates, and now a recession
At the recent NIC Conference in Washington D.C., conversations often circled back to transaction volume predictions, mergers and acquisitions, and workforce challenges. In fact, S&R co-founder John Sherman points to recruiting and retaining staff as the main challenge for operators in 2022. With the end of the year in sight and more economic challenges expected, many are looking for an exit strategy, while others are riding out the wave and embracing evolving housing models. Remember, we off free business valuations for owners, including a confidential analysis of your assets that will help you understand possible pricing for your SNF or another facility. 

Inflation Raising Concerns for Baby Boomers 

The senior housing sector has slowly climbed back from near-catastrophe at the height of the pandemic, with markets such as the Southeast and Montana reporting gains and embracing co-housing and active adult models. However, providers are in a tough spot as the recession carries on and “aggressive rate hikes” loom. Rates spiked at many eldercare facilities this year as operators grappled with the rising costs of food, insurance, utilities, and supplies, not to mention a lack of workers. 
In 2022, monthly fees at independent living facilities increased anywhere from 4% to 12%. According to data from the Wall Street Journal, nursing home costs rose by 4.8% from August 2021 to August 2022. With Baby Boomers worried about whether or not they’ll be able to afford care and operators facing economic and labor shortages, all eyes are once again on senior living. The industry is expected to experience exponential growth in the coming years, but it’s imperative operators remain open to new opportunities and embrace a future-focused mindset
Sherman & Roylance founder Shep Roylance points to a “twofold effect of what a resident can afford to pay for based on falling home prices, inflation, and the overall effect on their retirement income.” Roylance also notes the impact economic challenges can have on owner-operators’ ability to acquire facilities due to the cost of capital (some lenders no longer provide capital.) The overall spreads are tighter, not to mention labor concerns. 
We look forward to bringing you insights on the latest in senior housing and encourage you to reach out to learn more about our services. Stay tuned for the next blog in our series!