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The senior housing sector is facing a critical juncture.

Historically, construction starts have consistently outpaced inventory growth. However, recent data from NIC MAP Vision highlights a troubling reversal. The pace of new construction is failing to keep up, which could lead to significant challenges. 

Here’s what the data shows: For the first time since 2011, construction starts in primary markets have fallen below 2,000 units in three of the last four quarters. 

In addition, in the last two quarters alone, almost 2,000 more senior housing units have been added to primary markets than have been started. To put it simply, more senior housing units are being opened than are being initiated. 

Explaining the Trend

Reversals like this have happened before, but only twice in recent history.

We saw similar slowdowns during two major economic crises: the fallout of the 2009–2010 financial crisis and the immediate impact of the COVID-19 pandemic in 2020. Both instances caused significant disruption to the senior housing market.

However, the current slowdown is happening at a time when demand for senior housing is growing faster than ever, making the current lag in construction particularly problematic.

A Growing Market Imbalance

The first chart below represents this growing gap, tracking construction starts minus inventory growth.

(Construction starts refer to the number of units at projects breaking ground, while inventory growth measures the net increase in available units—this accounts for new units opening but also deducts units that are closed or removed from total inventory.)

Chart 1: Construction Starts Minus Inventory Growth 

What this chart reveals is that for much of the last decade, construction starts generally exceeded inventory growth.

This means that new projects were being built at a sustainable rate to meet the future anticipated need.

However, starting around 2020, we begin to see a shift, where starts began to fall behind inventory growth. The blue bars on the chart, which represent quarterly figures, illustrate how consistently more units have been delivered than started. This is a significant concern for the future of senior housing because the fewer new projects being initiated, the more likely it is that demand will surpass supply in the near future.

The orange line, showing annual data, further highlights this trend. You can see that after a period of consistent starts, the line begins to dip, reinforcing the idea that new construction is slowing down. This divergence between units started and delivered becomes particularly pronounced in the last years, indicating an increasing imbalance in the market.

Shrinking Pipeline for Future Inventory

The second chart drives the idea of imbalance home. It illustrates that, as of the third quarter of this year, only 29% of senior housing units currently under construction began in the last year—an all-time low. This means that the vast majority of units now under construction have been in progress for over a year, signaling a significant drop in recent groundbreakings.

Chart 2: Percentage of Units Under Construction That Started in the Last Year

You can see from the chart that in most quarters, between 60-80% of units under construction had started within the last year, which reflects a healthy pace of development. However, starting around 2020, this percentage begins to steadily decline. The steep drop-off in the last few quarters is a clear indication that fewer new projects are starting, and the pipeline for future inventory is shrinking.

The significance of this decline cannot be overstated. Senior housing developments are long-term projects that often take several years from pre-development to groundbreaking to opening. When new starts fall behind, the market will inevitably face a shortage of available units in the future. This is why the current lag is so concerning—while there may be a temporary benefit to occupancy rates in existing properties, it won’t be long before the lack of new units starts to impact availability.

The Rising Demand for Senior Housing

The NIC MAP Vision Senior Housing Market Outlook report makes it clear that the demographic wave is upon us. The aging Baby Boomer generation, which is set to turn 80 in large numbers starting in 2025, will require more housing options than the current pace of construction can accommodate. Population growth in the 80+ age bracket has already begun to materially outpace senior housing inventory growth, a trend that is only expected to accelerate in the coming years. This shift will place increasing pressure on developers and investors to respond.

Implications for the Industry: Short-Term Gains, Long-Term Consequences

In the short term, this imbalance will likely benefit operators and investors, as occupancy rates in senior housing are poised to rise due to high demand. With fewer new units entering the market, existing properties will likely see increased occupancy, pushing revenue and eventually margins higher. This may present a silver lining for operators currently in the market, but the long-term effects could be far less positive.

The senior housing industry operates on a multi-year timeline for development, from pre-planning to groundbreaking to opening. Even if starts were to increase tomorrow, it would be several years before new units could be delivered. This extended timeline further complicates the current situation, as the time lag between recognizing the demand and responding with actual inventory could exacerbate the supply shortage.

Furthermore, NIC MAP Vision has reported that the time it takes to complete a project—from breaking ground to opening the doors—has increased, adding yet another layer of delay to the process.

Growing Construction Starts is Crucial for Long-Term Market Health

The data is clear: senior housing construction starts are falling critically behind the pace needed to meet the coming surge in demand.

NIC MAP Vision’s Senior Housing Market Outlook Report underscores the urgent need for more inventory growth to support the surging demand. The growing 80+ population will require an unprecedented expansion of senior housing, and the industry must rise to meet that challenge.

While short-term gains in occupancy will benefit existing operators, the long-term consequences of an undersupplied market could spell trouble for the industry. The time to act is now. Developers, investors, and industry leaders must recognize the critical need for increased starts to avoid a future supply crisis.

NIC MAP Vision continues to lead the way in providing the insights necessary to navigate this challenging landscape, and the data points to one conclusion: Without immediate action, the senior housing sector may find itself struggling to keep pace with a rapidly aging population.

If you’re interested in learning more about NIC MAP Vision’s data, analytics, and insights products, talk to a product expert.