Rebecca Burns reports for The Lever on the plight of older adults living in private-equity-owned senior housing. The bottom line: Watch out, private equity is buying up senior housing and hiking up rents; older adults are at risk of eviction.
Background: Older adults need affordable places to live, where they can age in communities with strong support systems. There are some good options, but many options are unaffordable. Seeing an opportunity for big profits, private equity has stepped in to the senior housing market.
But, be it senior housing or nursing home care, private equity is watching out for its investors first and foremost, not older adults. In the nursing home arena, private equity firms have lost business as a result of a sharp rise in Covid-19 deaths. To maximize profits, they cut staff. Stories abound of residents not being cared for. The federal government has not addressed this crisis yet. President Joe Biden said in his State of the Union address last year that this type of predatory behavior “ends on my watch.”
Wall Street firms have still done well in the nursing home arena, while older adults have struggled. In private-equity-owned nursing homes, at least one group of researchers has found that resident death rates were up by 10 percent. The private equity firms reduce staffing to increase profits. One study found a 50 percent increase in use of anti-psychotic medicines at private-equity owned nursing homes; it was the owners’ way of compensating for fewer staff.
“Wellness” housing for seniors: Many Wall Street players have moved into owning and renting out “wellness” housing units to older adults. Wellness housing does not require nursing staff. Wellness housing is different from assisted living facilities and does not provide long-term care services. Investors count on older adults to be able to pay the rent with the proceeds they received from selling their homes.
Welltower is a real estate investment trust or (REIT) that owns thousands of units of housing for older adults, as well as 2,000 health care facilities. Welltower and other private-equity-backed firms see big dollar signs in the senior housing and health care markets.
One emerging crisis for people living in private-equity owned senior housing is big unexpected rent hikes. Welltower, for example, is raising rents on its housing far more than other landlords to increase profits. It can do so because the supply of affordable housing for older adults is very limited. And, Welltower owns a larger amount of moderately priced housing for older adults than any other company.
Companies like Welltower lure older adults to move into them with the promise of small rent increases, community and a vast array of amenities. Still, one resident whom The Lever profiled arrived at his unit only to find that even basic safety features were not in place. Soon after, residents were told that their rents were rising as much as 39 percent, more than four times the increases in adjacent communities.
The federal government helps Welltower to profit handsomely. As a REIT, Welltower benefits from federal tax-exempt status. It gets a big tax subsidy. The goal of the tax subsidy was to incentivize investments that delivered positive outcomes. Instead it is subsidizing investments that make housing unaffordable for older adults.
The federal government also gave Welltower $65 million in Covid funds. The money was intended for health care providers. What is the federal government doing to help older adults who need affordable housing?
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