Senior Living Development Projects and their Impact on Local Communities

The expansion of senior living development projects is having a profound impact on communities, the economy, and the broader real estate sector. As the U.S. population ages rapidly, these projects are becoming increasingly vital.

Senior living developments are significant economic engines for local communities. On average, a newly developed senior living community can create around 100 permanent jobs and generate approximately $6.1 million in annual economic activity for the area. These projects stimulate local economies by increasing demand for goods, services, and healthcare, and by providing employment opportunities across a range of skill levels.

Beyond direct economic benefits, senior living facilities contribute to the improvement of various societal sectors. They often require partnerships with local healthcare providers, service vendors, and community organizations, fostering a more integrated and supportive environment for seniors.

Meeting Growing Demand

The senior population, particularly those aged 80 and above, is projected to grow at an average annual rate of 4% from 2023 to 2040.  This demographic shift is fueling unprecedented demand for senior housing and care options.

Yet, despite the growing need, the pace of new senior living development is lagging. Over the past two years, supply has only grown by about 1.4% annually, adding roughly 16,000 units each year. This is far below what is needed to keep up with demand, leading to higher occupancy rates and increased pressure on existing facilities. By 2026, the industry is expected to fall 50% short of the required inventory, with only 25% of necessary units being developed.

Challenges Facing the Sector

The median construction duration for senior living properties has increased significantly, from 16 months in 2015 to 29 months in 2024, due to rising construction costs and a tougher financing environment.  These challenges are slowing the pace of new developments, even as demand accelerates.

Currently, there is a projected $1 trillion investment shortage in senior living development by 2040, highlighting the urgent need for increased capital and innovative financing solutions to meet the needs of an aging population.

Future Outlook

Despite these challenges, the senior housing and care sector is poised for a promising year in 2026, driven by strong demographic trends, lower interest rates,  and improving operational performance.  The industry is expected to thrive as it adapts to the evolving needs and preferences of a more diverse and educated senior population.

The growth of senior living development projects is essential for supporting an aging population and brings substantial economic and social benefits to local communities. However, the sector faces significant challenges in keeping up with demand, requiring innovative solutions and increased investment to ensure that seniors have access to quality housing and care in the years ahead.