Gro w i n Continuing Care Retirement Communities
after more than a decade of explosive growth, the CCRC industry
faces challenges in a contracting U.S. real estate market.
In 2007, the future seemed rosy for the continu- ing care retirement community (CCRC) industry—as it
did for the rest of the U.S. real estate market. CCRCs were the
beneficiaries of a number of favorable conditions, including a
target market that was growing both demographically and financially, exuberant equity markets that left the elderly flush with
cash, reasonable capital borrowing rates that allowed CCRCs to
replace aging facilities and expand, and booming real estate markets with capital appreciation annually exceeding double digits.
In the current economic environment, the combined effect
of troubles in the underlying real estate markets and financial
markets not only has stifled the development of new CCRCs
and the expansion of existing CCRCs but also has challenged
CCRCs that previously were considered to be financially solid.
These well-publicized financial issues, as well as bankruptcies
in the industry, resulted in investigations and reports last year
by both the Government Accountability Office (GAO) and the
U.S. Senate Special Committee on Aging.
It’s important to remember that the vast majority of CCRCs
remain actuarially and financially solvent and will emerge from
today’s challenges stronger than ever. But while both the historical and most recent rates of bankruptcies among CCRCs are
significantly below other industries, residents of CCRCs that
fail may face a situation in which their housing, health care,
and a significant portion of their wealth are all tied up in an
investment that has gone south.
How CCRCs Work CCRCs offer older adults an innovative and independent lifestyle that’s unique from other housing and care options. De- pending on the type of contract, CCRCs provide varying degrees of financial security to their residents by transferring health care risks to the organization. Emerging from traditional religious and community-based models, CCRCs have evolved and diver- sified dramatically in the past 30 years, giving consumers more service packages and entrance-fee options.
NANCY NeHRiNg / iSToCKPHo To
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