Senior Housing Supply Rising In Inner Houston, But For Affordable Options, Turn To Suburbia

More senior housing developments are emerging in Houston’s urban core, reflecting growing demand in those submarkets for centrally located facilities. But when it comes to affordability, most prospective senior residents must look to the outskirts of the city.

Senior housing development in central Houston is growing, with multiple mid-to-upper tier projects underway, according to RCM Senior Living President David Keaton, a panelist at Bisnow's Healthcare South full-day event Feb. 13.

Forecasts call for a wave of baby boomers to hit the senior housing sector in the next five to 10 years, and cities with growing populations like Houston are expected to see strong demand in that time frame. Keaton said developers have been trying to get ahead of that boom.

“Developers and operators have been gearing up and building a lot of inventory in anticipation of that,” Keaton said.

Development has been strong in Houston’s suburbs for years, but recently the urban core has gotten into the game.

Houston-based RCM opened The Village of River Oaks in 2017, and is set to open The Village of Southampton in Rice Village this April. 

Tradition Senior Living opened a Buffalo Speedway location in 2019, and is building another senior housing property on Woodway Drive that is due to open in the spring.

These urban properties are designed to sate demand for the walkable, highly amenitized, urban atmospheres that baby boomers are expected to desire more than past generations.

“When you look at all the high-end, high-rise condominium towers in Houston, and all those folks are looking at some point making possibly a move to senior living, they’re used to living in urban areas, they’re used to living in high-rises,” Keaton said. “For them to move out of those condominiums and move out to the suburbs, it’s something they’re not really interested in. We’re meeting a need for the folks that are already living in urban areas.”

But that type of product adds expense, and the amenities and services available in independent and assisted living communities already come with a hefty price tag, setting them apart from typical multifamily development. Aside from the hospitality aspects of running a senior housing facility, operators need to hire experts in fields like medication management, incontinence care and memory support.

“The question is, how you can deliver care and adequately staff those buildings for a cost that makes sense,” CBRE National Senior Housing Vice Chairman Aron Will said.

“[Affordability] is the biggest crisis in the industry today.”

Many senior housing communities are mid-to-upper market products, and do not accept Medicaid as a form of payment. These upper-scale projects often have extra staff and concierge services, plus higher-end fit and finishes, Keaton said.

The average monthly cost of senior housing can vary wildly, depending on the level of care provided, the size of the unit and location. Even the floor and available views matter.

Keaton said prices for independent living housing can start at $3K/month, depending on location. That can escalate as high as $8K to $10K/month, if a prospective resident wants to live in a large, top-floor unit in an expensive area like Rice Village.

While those types of communities are desirable, a significant percentage of the population simply cannot afford them.

“Houston has challenges with building affordable housing for all populations. Community opposition to affordable housing developments, including those solely designated for seniors, is a frequent roadblock,” Houston Housing Authority interim President and CEO Mark Thiele said.

The Houston Housing Authority has six communities dedicated to senior living, with a combined total of 1,290 units. The organization is working on two significant revitalization projects at the 6000 Telephone Road and 2100 Memorial senior communities.

“Houston ranks first in Texas for having the most severe affordable housing shortage with only 19 affordable housing units for every 100 households in need,” Thiele said. “This alarming statistic can be partially attributed to the ‘not in my backyard,’ or NIMBY, mindset among many residents who don’t understand the community need or economic benefits that stem from the availability of affordable housing.”

Will believes that the affordability problem will develop into a real crisis within the next six to seven years, as the baby boomer generation begins to seek senior care.

Building more affordable options means looking to the suburbs. Cheaper land, plus variable amenity offerings, can help keep prices down.

“You have to build somewhat outside of the urban cores in order to get that level of affordability. The cost of land in the city center areas just doesn’t allow you to build that kind of model,” Keaton said.

Houston-based RCM Senior Living operates 35 properties across Texas, Arkansas and Oklahoma, with the majority falling within the greater Houston area. Of those properties, 22 are considered not-for-profit communities, according to Keaton.

Keaton said providing more services and amenities for lower incomes can be challenging. Aside from location, the size of the complex can play a role in keeping costs down.

“It’s hard to operate a community under, say, 100 units and keep it really affordable,” Keaton said.

By building larger complexes, operators can allocate the costs over a greater number of units.

Another challenge of senior housing is creating a community that can appeal to multiple generations.

“Having product that stands the test of time, which is really going to appeal to who the target demographic is today — but then, really appeal and have enduring value in seven, 10, 15 years from now — that’s one of the things that the industry is thinking about,” Will said.

Baby boomers, born between 1945 and 1964, are major influencers when it comes to senior housing, since they are often making decisions on behalf of their elderly parents, Will said.

As the generation that founded Starbucks, baby boomers are particularly interested in social spaces, modern amenities and buildings with plenty of light, Keaton said. With this in mind, future developments will likely be more amenity-driven than in prior decades.

In addition, many hospitality-based and monitoring technologies are coming into the sector.

“There’s a lot of push to utilize voice-activated services such as Alexa and Google and so forth, where it allows the resident to more easily access the technology,” Keaton said.

He points to examples such as GPS technology, particularly for memory care. This can include placing small sensors on the clothes of residents, to combat dementia issues.

Another area that has seen changes is communication technology. Many communities have services similar to hotels, where there is a tailored television in the apartments with a daily calendar, menus, and capacity to put in work orders for maintenance, Keaton said.

Will believes that development in Houston, as well as other metropolitan statistical areas, is likely to be much more selective in the next two to three years. Many of the larger MSAs have seen a flurry of recent development, and demand will need to catch up with supply.

“In the short term, I don’t think there will be a big building boom. Just based on supply and demand, it’s very selective,” Will said.