Senior housing sector faces obstacles to affordability

Senior housing sector
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The elderly population is set to increase across Europe, but growing demand is not necessarily positive, reports Sylwia Ziemacka.

A three-pronged strategy is necessary to tackle the affordability problem in senior housing in Europe, delegates heard at the “Best practices in retrofitting and operational design” briefing at this year’s SHHA summit in Brussels. It was the second such event hosted by the Senior Housing & Healthcare Association, EPRA and Deloitte.

“Senior housing cannot be a privilege for a happy few, like a Lamborghini or a house in Mauritius,” said Sébastien Berden, chief operating officer for healthcare at Cofinimmo. “We need innovative ideas to overcome the obstacles to making senior housing affordable.”

Demographics point to growing demand, as the elderly population is set to increase across Europe. Before 2040, the ratio of working-age people to the over-65s, which is currently three to one, will rise to two to one. In Italy, that ratio will be reached much earlier. However, increasing demand is not necessarily positive; solutions must be found to the problems the sector faces.

Residual value

“There are clouds on the horizon and three headwinds for the industry,” said Berden.

“First, demand will be tremendous, but we might not be able to meet it, given the volume needed in a short space of time. Another aspect is the cost of construction. There has been a 14% increase just in the cost of materials in the last three years.”

The third challenge is staff availability. “This is a real problem, which is likely to get worse, as the increase in demand adds additional pressure on finding staff willing to work in healthcare,” said Berden.

New solutions are being tried to deal with the demand for new buildings and the cost of construction.

“We must not only design and build good retirement homes, but also make sure they are future-proof and stand the test of time,” said Anja Dirks, architect and founder of Studio id+. “They need to be flexible and long-lasting. The choice of building materials with a long lifespan makes the asset worth more over time.”

The concept of residual value used to apply just to the value of the land, but now it’s increasingly about the materials used, because they can still have a value further down the line.

“Using modular, standardised systems allows us to build more quickly and more cheaply,” said Tom Sheridan, chief development officer at Cara Living. “Also, density can be a solution to the affordability question for the end user. Living more densely is cheaper, but it also gives residents more of a sense of community.”

Cara Living’s solution is vertical villages in urban areas, close to services and amenities in the community.

“We rationalised all three strands of what we do – design, property and operation – and created a fully integrated operational platform,” said Sheridan. “In the senior-living space, the operational side is as important as the building. It’s a combination of different factors and you have to get them all right.”

In the UK, the Audley Group has found its own long-term solution to the affordability issue. It has diversified from its traditional luxury retirement villages and introduced a new brand, Mayfield, which has higher density, larger sites and lower prices.

Integrated solutions

“We try to create affordable propositions for our residents, not just at the point of purchase, but throughout their stay with us,” said Gary Burton, chief operating officer and chief financial officer of the Audley Group. “They have an option to have deferred payments, to the sale of the asset at end of life. We minimise the amount we receive now and we defer more. It’s a longer-term investment for us and you need deeper pockets.”

The deferral scheme makes it possible for residents to afford not just the monthly service charges and management fees, but also to participate in events, activities and excursions which improve their social interaction and quality of life. The design and spatial arrangement of the villages are increasingly focused on social interaction and community.

“We do retirement living with an element of care, and people who work in our villages come from the hospitality sector,” said Burton. “Guests stay for 10 years rather than 10 days, but the approach is the same and so is the level of service. We have a big focus on staff retention, and a positive environment plays an important role.”

Cofinimmo has also devised solutions that tick all three boxes – speed and cost of construction, affordability for residents and staff availability and retention. The goal is finding the right balance between feeling at home in your own space while being part of a community.

“We create a multi-service operation with economies of scale that allows staff to move across,” said Berden. “[We create] a retirement village with assisted living, but also additional services like a nursing home, a day-care centre and other facilities.

“There is a bright future for assisted living, especially if integrated with other kinds of care.”