Though the overall housing market has not escaped the doldrums, the senior housing sector, driven by investment companies, has gone gangbusters since 2010.
In the third quarter of 2011 alone, 39 senior housing deals worth $5.5 billion were completed, primarily by real estate investment trusts that specialize in housing for the elderly. That figure includes independent-living and assisted-living communities, but not nursing homes.
The total value of senior housing deals in the quarter ended Sept. 30 was greater than the combined total in the previous two full years, according to the National Investment Center for the Seniors Housing & Care Industry in Annapolis, Md.
Driving the consolidation in senior housing is the ability of real estate investment trusts to borrow cheaply in conjunction with the resilience of senior housing during the recession, giving investors confidence that strong returns will continue.
Steve Monroe, editor of the trade newsletters SeniorCare Investor and Senior Care Acquisition Report in Norwalk, Conn., cited the small drop in the senior housing occupancy rate during the real estate collapse as reason for its attractiveness to investors.
"It dropped from 91 percent to 87 percent," Monroe said. "If you only dropped that much in the worst we can throw at you in 70 years, that's pretty damn good."
Senior housing includes independent living and specialty, assisted living, which is for the elderly who can no longer live safely on their own but who do not need the more intense level of care provided in nursing homes.
For investors and operators, assisted living has an advantage over nursing homes in that it is not very dependent on government funding.
Nursing homes run the risk that the federal government could radically reduce Medicare reimbursement rates, as happened in the 1990s. The 11 percent cut that started Oct. 1 is hurting, but not destroying, nursing homes' bottom lines.Assisted-living residents typically use private resources to pay rent.