Active Adult Housing Boom: Critical Local Market Insights for Success

The active adult housing market is surging, with occupancy rates that developers dream of. According to recent data from the National Investment Center for Seniors Housing and Care (NIC), active adult communities are boasting an impressive 94% occupancy rate nationally, far outpacing traditional independent and assisted living options,

which typically hover in the high 80s.

NIC anticipates that an additional 2.2 million adults aged 65 and over will enter the rental housing market within the next decade. Even so, active adult housing currently penetrates only about 0.5% of the 65–84-year-old household market, significantly lower than the 10-12% market penetration for traditional senior housing, according to NIC.

What's fueling this robust demand? The demographic wave of aging Baby Boomers plays a starring role. Nevertheless, there is no archetype for the ideal active adult prospect. Assessing the feasibility of active adult projects requires a fresh perspective.

Assessing active adult market oppotunities

Meeting Expectations for the Active Adult Crowd

Active adult housing, as defined by NIC, caters to a unique market. It's a market-rate, multifamily, age-restricted, and lifestyle-focused community. Today's 55+ residents aren't just looking for a place to retire; they're seeking a vibrant lifestyle. Residents are often in their late 60s and 70s. Communities targeting this demographic must offer an engaging way of life, with community at its core.

This lifestyle-centric, community-oriented model resonates strongly with today's active retirees who prefer a vibrant community atmosphere without the care-focused programming associated with senior housing. This marks a significant shift, suggesting developers need to pivot from demographic-driven to lifestyle-driven strategies to remain competitive. An attractive market does not look promising only from a quantitative perspective. Attractive active adult markets would also need to be qualitatively promising, requiring additional market feasibility methods. These could include focus groups, consumer sentiment analysis, and, above all, psychographic analysis.

That said, the distinction is subtle because wellness and resident health initiatives offer compelling benefits for senior living providers; therefore, there may be a role for active adults in the value-based care space, given the lifestyle and community aspects of the setting. The presence of managed care and healthcare networks matters even in active adult markets, so a solid “lay of the land” in specific submarkets is beneficial.

Balancing Luxury with Affordability in Active Adult Housing

Demand even for historically needs-based settings, such as assisted living, behaves similarly to what economists call luxury goods. Even senior housing is highly price elastic, meaning that price increases can lead to disproportionately large declines in demand. Luxury does not have to be expensive or lavish properties. It simply fills some aspirational wants above and beyond the basic need (i.e., the housing component). This underscores the importance of demonstrating clear value through lifestyle amenities to justify pricing in active adult communities. A thorough understanding of the local competitive set is essential.

Fortunately, active adult communities generally present a more affordable option, often costing 30–50% less per month than traditional independent living communities. This pricing advantage makes them particularly appealing to middle-income seniors who desire the perks of independent living without the hefty price tag.

Local Market Dynamics Trump National Trends

National statistics paint a promising picture, yet successful active adult housing projects require a deep understanding of local market dynamics. A critical mistake is assuming that favorable demographics alone guarantee success. Effective development requires a thorough knowledge of the local consumer base, their preferences, income, and even psychographic profiles.

Take the overall housing market for example. Research shows that interest rate and mortgage rate increases can mute older adult housing transitions for four to five years. Active adult and senior housing options plug into an overall patchwork of housing, amenities, lifestyle, and wellness products in a submarket area. Understanding those local dynamics allows you to see the contours or shape of demand in a submarket.

Aligning Active Adult Demand with Local Opportunities

The bottom line for developers and owners is clear: while national trends offer a bullish outlook, capturing that demand depends heavily on strategic local execution. Active adult housing presents substantial opportunities for those who deeply understand and deliver precisely what today's dynamic, lifestyle-oriented retirees demand.

Developers poised to succeed will adopt a forward-thinking, localized strategy, offering not just housing but a community experience tailored to the nuanced preferences of their specific market. By thoughtfully integrating lifestyle amenities, fostering a sense of community, and responding adeptly to local dynamics, developers can transform demographic opportunities into thriving, fully occupied communities.

Related Services: Research Design & Management, Demographic Analysis, Competitive Strategy, and Demand Analysis.

Dan Lindberg is the founder and principal of Applied Economic Insight ® LLC.

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