Life plan communities are facing numerous challenges and opportunities in the coming years. According to Margaret Johnson, senior director for life plan communities at Fitch Ratings, stability may be the best outcome the sector can hope for due to various factors. Despite the stable outlook, there are considerable headwinds ahead for life plan communities, including cost inflation, higher interest rates, and volatility in the housing sector.
Johnson emphasized that life plan communities have the ability to adapt to changing times by adjusting their unit mixes and passing rate increases to residents to offset their costs. The demographic shift, particularly with the appeal of the model to the baby boomer generation, could potentially drive demand and push the sector into a more positive outlook. However, significant stabilization in the availability of workers, their wages, and housing prices is crucial for this to happen.
While the industry as a whole is resilient, the opportunity costs of construction and capital limitations could impede growth and innovation. Despite these challenges, the industry’s favorable demographics and potential for mergers and acquisitions provide reasons for optimism. The ability of life plan communities to attract older adults from the incoming baby boomer generation will depend on their locations and the demand in those regions.
