A new generation of senior living communities, replete with spacious living quarters, multiple dining venues, and other extensive amenities, is revitalizing a real estate category historically associated with institutional nursing homes. However, as the industry has modernized, a new perception has taken root. Namely, that these amenity-rich senior living communities are exclusively for the wealthy.
This widespread misconception has prevented investors from understanding the full potential of this powerful asset class.
Yet the data is clear: Today’s senior living communities are within reach for many Americans, particularly when compared to the full costs of aging in place with home-based care.
This analysis reveals how the numbers truly stack up when comparing senior living to home-based care options — and why senior living is often actually the more affordable option.
The financial reality of home-based care
Thanks to misconceptions about the affordability of senior living, many seniors and their families believe aging in place with home-based services is the more economical choice. However, a comprehensive cost analysis demonstrates that the opposite is often true.
First, consider the cost of hiring home-based care. According to private pay home care rates from “A Place for Mom” and senior living rents from NIC Map data, the lowest monthly cost for even the most basic in-home care in the United States can be staggering:
- 12-hour daily in-home care: $8,928 monthly
- 24-hour daily in-home care: $17,856 monthly
- By comparison, a one-bedroom assisted living apartment averages $5,225 monthly
Even more revealing is a long-term cost analysis.The current average length of stay for residents in senior living communities in the United States is 22 months. Over a 22-month period, seniors would spend:
- $196,416 on 12-hour daily in-home care
- $392,832 on 24-hour in-home care
As compared to:
- $114,950 on one-bedroom assisted living
Now let’s look at how these costs balloon for seniors who require care longer than the 22-month average. Over the course of five years, they could expect to spend:
- $535,680 on 12-hour daily care
- $1,071,360 24-hour in-home care
As compared to:
- $313,500 on one-bedroom assisted living
Yet, these figures only tell part of the story. Hiring reliable, high-quality home-based care can be difficult, especially when families must compete with senior living communities for the same limited labor pool. This can lead to inconsistent care as caregivers change, creating both financial and quality-of-life challenges.
Beyond caregiver salaries, aging in place requires seniors and their families to manage a number of “hidden” costs. For one thing, they must bear any additional costs associated with employing caregivers, like employment taxes and insurance (as well as shouldering the risk, however small, of legal liability). They must also cover housing-related costs, such as property taxes, utilities, home maintenance, and expensive home modifications to accommodate mobility challenges. Finally, transportation, meals, and social activities must be arranged separately, adding both expense and complexity. All of these expenses are either eliminated or included in monthly senior living rental fees.
Understanding senior living affordability
Financially speaking, the current aging population is better positioned than any previous generation to afford quality senior care. Americans aged 70 and above now hold a record 30% share of the country’s wealth — a surge of over $14 trillion in net worth since late 2019 — while comprising only 11% of the population.
While it’s true that seniors as a demographic hold a disproportionate share of wealth, different senior living communities cater to various income levels. And many are designed specifically for middle-class residents. For these seniors, home equity is often the key to affordability. The following table shows how NexCore’s portfolio of tiered senior living brands is structured to meet the needs of a wide range of seniors.
Middle-class seniors with even modest equity in their homes are well positioned to afford senior living. That’s because the cost of assisted living over the typical 22-month stay ranges from just 15% to 43% of the average home value, depending on the market.
Most homeowners have at least 20% equity in their homes upon purchase. The average senior will need minimal additional equity — anywhere from 0% to 23% — to cover their entire assisted living stay. For instance, a retired schoolteacher who purchased a home in the late 1980s can now sell that property and use just a fraction of the proceeds to fund their stay in a quality senior community.
The affordability picture gets even rosier when you consider that approximately 72-88% of seniors between ages 75-85 own their homes free and clear. And for many seniors, home equity is just one component of their total net worth.
In fact, one of our base criteria for selecting a Primary Market Area (PMA) in which to develop a senior living community is confirming that the median net worth of the 75+ age cohort is significantly higher than the total cost of a 22-month stay in assisted living. In all the markets NexCore invests in, this criterion has been met, meaning many seniors can comfortably afford assisted living.There are other sources of funding, too. For instance, many seniors cover a portion of the costs associated with senior living using long-term care insurance. In addition, some states are developing public funds — such as Washington state’s WA Cares Fund to help cover the cost of state residents’ senior living.
There are other sources of funding, too. For instance, many seniors cover a portion of the costs associated with senior living using long-term care insurance. In addition, some states are developing public funds — such as Washington state’s WA Cares Fund to help cover the cost of state residents’ senior living.
Quality of life considerations
While financial calculations are important, seniors and their families must account for other considerations when weighing senior living communities against aging in place.
Today’s senior living communities offer a suite of benefits that substantially and measurably impact quality of life:
- Professional care staff available 24/7
- Consistent, reliable care without the management burden on family members
- Purposefully designed living spaces that promote independence and safety
- Regular social activities and community engagement
- Nutritious meals without the need to cook or shop
- Transportation services
- Elimination of home maintenance responsibilities
These benefits address challenges that aging-in-place seniors often face, including isolation, inconsistent care, safety concerns, and the burden of home maintenance.
Research shows that residents of senior communities actually enjoy an improved lifespan and healthspan compared with those who age at home.
Today’s senior living residents:
- Live longer
- Receive more home healthcare, including preventative and rehab services
- Are more physically active and socially engaged
- Experience less loneliness
From both financial and quality-of-life perspectives, senior living communities frequently offer the stronger value proposition.
Beyond that, the proliferation of new, financially attainable senior living communities introduces the simple luxury of choice in a needs-based market that currently limits options. Seniors can now choose to make their homes in communities that offer the right level of care while at the same time aligning with their lifestyle preferences.
Making an informed decision
For many middle-class seniors, particularly homeowners, quality senior living communities are financially attainable. The key is conducting a thorough cost comparison that accounts for all expenses associated with aging in place, not just the base rent of a senior community.
For investors, the relative affordability of senior living makes this promising asset class even more compelling. The senior housing market serves a demographic with substantial wealth and growing needs. As awareness of the true cost comparison spreads, demand for quality senior living options will only increase. At the same time, nearly half of existing senior living housing stock is outdated and aging, further ensuring demand will continue to swiftly outpace supply.
The perception that senior living is only for the wealthy simply doesn’t align with current data. For many Americans, it’s not just attainable — it’s the financially prudent choice.