PART III: KEY DEMOGRAPHIC FINDINGS AND PROJECTIONS

The next three decades will see a tremendous increase in the size of the senior population as the Baby Boom generation ages and the lifespan of Americans increases. In meeting elements of its Mandate, the Commission conducted independent research, including original analysis of the American Housing Survey and other data sources, ¹⁶ hearings, and reviews of scholarly work. The Commission's research included groundbreaking work using U.S. Census Bureau data from the American Housing Survey, analysis of the Current Population Survey (CPS), and the Survey on Income and Program Participation (SIPP). The Commission noted several important trends regarding current and future seniors and their housing and health services needs. (Note: In general, seniors means persons 65 and older unless otherwise noted. Data describing today's housing are based on 1999 information.)

The Present

• In 1900, the senior population was less than 5% of the total U.S. population. Numbering 35 million seniors, it is now 12.4%. By 2030, the senior population will double to 70 million, or 20% of the U.S. population.¹⁷



• Nearly 20% of seniors have significant long-term care needs. In 1997, more than 5.8 million or 18% of non-institutionalized persons age 65 and older required assistance with their everyday activities, and about 1.2 million (3.7%) were severely impaired and required assistance with three or more activities of daily living (ADLs).¹⁸



• Many seniors across the income spectrum are at risk of institutionalization or neglect due to declining healthand the loss or absence of support and timely interventions. The risk is greatest for those with lower incomes.¹⁹



• There are nearly six times as many seniors with unmet housing needs as are currently served by rent-assisted housing.²⁰ Waiting lists for many types of subsidized housing are long. For example, in 1999, nine applicants were waiting for each Section 202 unit that became vacant within a year ²¹ compared with eight applicants in 1988.²²



• The affordable housing stock is in danger losing significant numbers of units. There are 324,000 Section 8 assisted units in senior properties that are at risk of "opting out," according to Commission research.²³

The Future

The Commission developed projections of the future needs for housing and services between now and 2020 based on existing and contracted research. The Commission's research led to the following key findings about the future senior population.

By 2020:

• The number of senior households is expected to grow by nearly 53%.



• More than 80% of senior householders will be homeowners.²⁴



• Nearly three-fourths of households with housing needs will likely be owners of their housing. ²⁵



• Almost 44% of senior householders will be age 75 and older.²⁶



• Even if current rates of disability continue to decline, the number of seniors with disabilities is expected to increase from 6.2 million in 2000 to 7.9 million.²⁷



• The need for Home- and Community-Based Services (HCBS) will grow substantially owing to the desire for seniors to age in place.²⁸

The number of seniors in need of affordable housing will also increase at a steady pace. In 2020, 730,000 additional rent-assistedunits²⁹ will be needed to accommodate the senior households age 65 and older who are likely to have housing problems at the same 5.8 to 1 ratio at which they are accommodated today.³⁰

The data shows that current and future populations of seniors require creative and diverse use of significant resources to meet their needs. The following demographic data shed light on the breadth of current and future needs.

Housing and Health Characteristics of the Senior Population³¹

Housing

Seniors currently occupy a diverse array of housing types. Their housing reflects both economic decisions and life circumstances such as the purchase of a house in middle age, new retirement lifestyles, the disability or death of a spouse, and/or changes in financial well being, personal health, and mobility.

Just over 21.4 million or almost 82% of older (age 65 and older) American householders live in conventional homes that they own or rent. Although homeownership is the norm, more than 16% of senior householders rent their accommodations, with most (70%) living in private market-rate housing, rather than government-subsidized or rent-assisted housing (Exhibit 1).

In 1999, the AHS database enumerated a total of 6.2 million rent-assisted units in the United States — 1.2 million (or 20%) of which, were occupied by age 65 and older households and another 200,000 or 2% of which were occupied by age 62 to 65 households.³²

Exhibit 1: Major Types of Housing Occupied by Senior Householders and Persons (Age 65 and Older) in the United States, 1999

	Type of Housing	Number of Unitsa	Percentage Distribution	Number of Persons	Percentage Distribution
	CONVENTIONAL HOUSING UNITS: SENIOR HOUSEHOLDERS b,c	21,423,000	81.5	29,138,000	84.5
	Total Owner-Occupied Units	17,196,000	65.4	24,216,000	70.2
	I-unit attached or detached	14,846,000	56.5
	2-49 units	836,000	.2
	50+ units	259,000	1.0
	Manufactured homes	1,255,000	4.8
	Unsubsidized Rental Units	3,011,000	11.5	3,584,000	10.4
	Government-Subsidized Rental Units	1,216,000	4.6	1,338,000	3.9
	CONVENTIONAL HOUSING UNITS: YOUNGER HOUSEHOLDERS (Under Age 65) OCCUPIED BY AT LEAST ONE OLDER ( Age 65 and older) PERSONc	2,166,000	8.2	2,336,000	6.8
	Owner-occupied dwellings	1,789,000	6.8	1,931,000	5.6
	Renter-occupied dwellings	377,000	1.4	405,000	1.2
	SUPPORTIVE SENIORS HOUSING UNITS	2,691,266	10.2	3,002,377	8.7
	Congregate Care and CCRCd independent living	644,852	2.5	818,962	2.4
	Assisted Livinge	507,414	1.9	644,415	1.9
	Skilled Nursingf	1,539,000	5.9	1,539,000	4.5
	TOTAL UNITS/PERSONS OCCUPIED BY SENIORSg	26,280,266	100.0	34,476,377	100.0
	All older householders	24,114,266		32,140,377
	All younger householders with senior occupants	2,166,000		2,336,000
	aNumbers all refer to units except for skilled nursing which are reported in terms of beds and treated as one-person households. bThe householder is the first household member listed on the questionnaire who is an owner or renter of the housing unit. cAn unknown, but probably small, percentage of the units in this category are probably counted twice, because the U.S. Census erroneously treats them as households rather than "group housing" and they are also being counted in the "Supportive Seniors Housing Units" category. As this percentage increases in size, it artificially increases the relative share of dwelling units considered as "conventional housing units." dCCRC: Continuing Care Retirement Communities eIncludes Board and Care facilities. fIncludes hospital-based facilities, private-pay facilities, and facilities managed by Department of Veterans Affairs gIncluding both "Conventional Housing Units" and "Supportive Seniors Housing Units" Notes for computing households: For the Congregate Care and Independent living units in CCRCs, an occupancy rate of 94.1% was computed. For assisted living facility units, an occupancy rate of 89.4% was computed. Occupancy rates obtained from financial indicators reported in unpublished data from National Investment Conference. A nursing home occupancy rate of 88.35% was computed and the share of beds occupied by age 65 and seniors in nursing facilities was computed as 90.29% See: Gabrel, C. and A. Jones. 2000. The National Nursing Home Survey: 1997 Summary, National Center for Health Statistics. Vital Health Statistics 13(147). Washington: U.S. Government Printing Office. To count only senior occupants, the number of assisted living units was reduced by 3.1% and the number of independent living units was reduced by 2.9%. Notes for computing number of persons: The following assumptions were made. First, of the 2,166,000 nonsenior households occupied by seniors, 170,000 households were occupied by two or more persons. For computation purposes, only two seniors per households were computed. This will understate the number of seniors to the extent that some households will contain 3 or more seniors. To estimate the number of persons occupying supportive senior housing units other than nursing facilities, it was assumed that there were l.27 persons per unit. Source: Supportive Seniors Housing Units data is modified from original tabulations found in Promatura Group, LLC. 2000. NIC National Supply Estimate of Seniors Housing & Care Properties. Annapolis, Maryland: National Investment Center for the Seniors Housing & Care Industries. Conventional housing unit data from U.S. Census Bureau. Current Housing Reports, Series H150/99, American Housing Survey for the United States: 1999. Washington, DC: U.S. Government Printing Office.

Senior Income

Income distribution is an important factor in determining need and eligibility for assistance for both housing and health programs. In some instances, those with incomes of less than 80% of area median income (AMI) are eligible for housing assistance. Those with incomes below 50% of AMI are, however, more likely to apply for and receive such assistance.³² Given that most seniors have fixed incomes due to retirement or decreased participation in the workforce, it is not surprising that nearly 40% of senior households reported incomes below 50% AMI, i.e. the lowest income quartile, according to Current Population Survey data (Exhibit 2).

Exhibit 2: Income Distribution of 65+ Population, 2000 by Area Median Income

Source: The Lewin Group tabulation of the Current Population Survey (CPS) 2001 March Supplement (which reports income data for 2000) for the Commission on Affordable Housing and Health Facility Needs for Seniors in the 21st Century, 2002.

The Medicaid program uses variations of Supplemental Security Income (SSI) eligibility levels or the Federal Poverty Level (FPL) to determine eligibility. About 10% of seniors live at or below the FPL and another 14% live below 150% of that level (Exhibit 3).

One of the principle challenges to public policy is to reconcile the multiple standards. AMI is a local standard used by HUD to determine eligibility for many of its subsidized rental programs, while the SSI level is largely a national standard with 100% SSI equal to about 74% FPL.³³ The maximum income eligibility for HCBS under Medicaid is generally 300% SSI, although variations exist among States.³³

Although some States have higher and lower levels for eligibility for Medicaid or other services, and HUD and other agencies have higher and lower standards for subsidized housing eligibility, 300% SSI and 50% AMI are the most useful eligibility standards for broad comparisons.³⁴ Therefore, for evaluation purposes, seniors with incomes below 300% SSI are compared with seniors at 50% of AMI to demonstrate potential eligibility discrepancies (Exhibit 4). Even this comparison is fraught with inadequacies because any national compilation of AMI leads to averaging that does not reflect vast differences in AMI at the local level.

Exhibit 3: Income Distribution of the Age 65 and Older Population, 2000 by Federal Poverty Level

Source: The Lewin Group tabulation of the Current Population Survey (CPS) 2001 March Supplement (which reports income data for 2000) for the Commission on Affordable Housing and Health Facility Needs for Seniors in the 21st Century, 2002.

Exhibit 4: Estimates of the Number of Households Headed by an Individual Age 65+ Meeting Alternative Housing and Service Income Eligibility Criteria, 1999 (in thousands)³⁵

Note: AMI levels are assessed against household income, while poverty and SSI levels are assessed against family income.

Source: The Lewin Group tabulations of the March 2000 Current Population Survey matched to HUD Section 8 income limits from http://www.huduser.org/datasets/il/fmr99rev/index.html for the Commission on Affordable Housing and Health Facility Needs for Seniors in the 21^st Century (March 2002).

Many seniors who are eligible for one type of assistance may not be eligible for the other, based largely on where they live in the Nation or even in a particular region of a State. In high-cost areas, many seniors qualify for housing assistance but not for Medicaid because the median incomes in those areas are quite high and do not compare well with the 300% SSI standard.³⁶ Likewise, although many seniors qualify for housing assistance, the shortage of affordable rental housing units or home repair and maintenance assistance compels them to "go without."³⁷ Finally, in some areas, because of very-low median income levels, seniors may qualify for services but not for housing assistance even if it is available.

Just as noteworthy as the discrepancies regarding income is the percentage of seniors who have incomes above these limits (Exhibits 2 &. 3). These seniors represent a large group, many of whom have moderate incomes but do not qualify for housing assistance or appropriate health and services assistance.³⁸

Health- and Service-Related Data

In 1999, more than 1.5 million seniors lived in skilled nursing facilities.³⁹ In addition, recent data show that more than 5.8 million or 18% of persons aged 65 and older, who did not reside in institutions such as nursing facilities, had difficulty performing either their everyday activities of daily living (ADLs) — or their instrumental activities of daily living (IADLs) — without assistance. This included about 3.18 million or 10% of seniors with at least one IADL limitation involving the following activities: preparing meals, doing light housework, taking a prescribed amount of medicine, keeping track of money or bills, and going outside the home. It also included about 2.61 million or 8% of seniors with at least one ADL limitation involving the following activities: getting in and out of bed or a chair, taking a bath or shower, dressing, walking, eating, and using or getting to a restroom. A smaller share of these seniors, 1.19 million or 3.7%, were especially impaired with limitations in three or more ADLs (Exhibit 5).

Exhibit 5: Age 65 and Older Persons by Poverty Status in Percentages (1996)

Source: The Lewin Group Projections from the 1996 Survey of Income and Program Participation, Wave 5, prepared for the Commission on Affordable Housing and Health Facility Needs for Seniors in the 21^st Century, 2002.

A little more than 2.6 million or 8% of seniors have a mental disability that seriously interferes with their everyday activities.⁴⁰ Older seniors are more likely to suffer from these limitations. A little more than 15% of those age 75 and older have IADL impairments, almost 13% have ADL impairments, and just under 12% have a mental or cognitive disability that interferes with everyday activities.⁴¹

Proportionally, subsidized renters are the most likely to have impairments and homeowners are the least likely (Exhibit 6). As an aggregate, however, because of the large number of senior homeowners, there are four times as many with impairments as unsubsidized renters and nearly ten times as many as subsidized renters. Therefore, the Nation faces a challenge in serving seniors in diverse settings, including their own single-family homes, rental housing, retirement communities, and homes of family members.

Exhibit 6: Disability Among Seniors by Housing Tenure, 2000

All	%	Owners	%	Unsubsidized Renters	%	Rent-Assisted		%
Total 65+	33,328,000	100.0	27,158,000	100.0	4,858,000	100.0	1,397,000	100.0
No ADL or IADL	27,130,000	81.4	22,581,000	83.1	3,670,000	75.5	929,000	66.5
Any ADL or IADL	6,198,000	18.6	4,577,000	16.9	1,188,000	24.5	468,000	33.5
At least one IADL	3,372,000	10.1	2,469,000	9.1	629,000	12.9	290,000	20.8
At least one ADL	2,826,000	8.5	2,109,000	7.8	49,000	11.3	177,000	12.7
With a mental disability	2,742,000	8.2	2,055,000	7.6	528,000	10.9	163,000	11.7

Source: The Lewin Group Projections from the 1996 Survey of Income and Program Participation, Wave 5, prepared for the Commission on Affordable Housing and Health Facility Needs for Seniors in the 21^st Century, 2002.

Because nearly one-fifth of all seniors have impairments, the availability and affordability of health and services is vitally important to their well being and quality of life.

Future Housing Needs of Seniors

According to Harvard Joint Center for Housing Studies projections, from 2000 to 2020 the number of senior households is expected to grow by nearly 53%. Owner households are expected to grow by more than 60% and renter households by 22% (Exhibit 7).⁴² The growth in both groups will impact an already overburdened housing and health care system extensively, requiring flexible responses to meet the needs of renters and homeowners.

Research into the unmet needs of seniors was conducted by the Commission using American Housing Survey data and Harvard Joint Center projections. AHS and HUD use specific formulas to gauge and describe needs, found in the box below.

Exhibit 7: Household Growth Projections 2000-2020

		Owner Households	Renter Households	Total Households	Ownership Rate
Age Groups and Year
2000
Age 65-75		9,470,000	1,972,000	11,442,000	82.80%
Age 75 and Older		8,784,000	2,637,000	11,421,000	76.90%
2000 Totals		18,254,000	4,609,000	22,863,000	79.80%
2020
Age 65-75		16,880,000	2,790,000	19,670,000	85.80%
Age 75 and Older		12,424,000	2,838,000	15,262,000	81.40%
2020 Totals		29,304,000	5,628,000	34,932,000	83.80%

Source: "State of the Nation's Housing 2001," Joint Center for Housing Studies, Harvard University (2002).

AHS data are self-reported and suffers from the shortcomings related to underreporting of income and assets.⁴⁶ Nevertheless, it is the most comprehensive national data set available for analyzing of the scope of the housing challenges seniors face, now and in the future (Exhibit 8). Those who have "priority" and "less serious" problems are considered "at-risk" in terms of their housing costs and quality.

Currently, 1.2 million rent-assisted units are occupied by age 65 and older households.⁴⁷ There is an at-risk population of 7.1 million households (owners and renters) who are not receiving rental assistance identified as having priority or less serious housing problems.⁴⁸ This translates into 5.82 unassisted senior households with problems for every one existing rent-subsidized unit now occupied by a senior household.

To estimate the number of rent-assisted units that will be needed to accommodate at-risk low-income senior households by 2020, the analysis makes two general assumptions. First, projections are based on the number of rent-assisted units necessary to accommodate the growth of all current age 65 and older unassisted owners and renters with priority or less serious problems (of all urgencies) — a total of 7.1 million households. Second, the projections assume that these owner and renter groups of households will grow at the same rate for all senior owners and renters.⁴⁹

Exhibit 8: Current and Projected Number of Low- and Higher-Income Age 65 and Older Households in Unaffordable or Poor Quality Dwellings (by Housing Tenure, 1999 to 2020)

	1999			2020
Income Group	Total	Owners	Renters	Total	Owners	Renters
All Income Levels
With priority problems	3,890,000	2,468,000	1,422,000	6,099,070	4,205,761	1,893,309
With less serious problems	3,868,000	2,667,000	1,201,000	6,140,905	4,543,177	1,597,729
With all problems	7,758,000	5,135,000	2,623,000	12,239,976	8,748,938	3,491,038
Extremely Low-income
<30% AMI with priority problems	2,699,000	1,630,000	1,070,000	4,202,353	2,777,711	1,424,642
<30% AMI with less serious problems	1,406,000	995,000	411,000	2,242,819	1,695,597	547,222
<30% AMI with all problems	4,105,000	2,625,000	1,481,000	6,445,171	4,473,308	1,971,864
Very-Low-income
<50% AMI with priority problems	3,375,000	2,064,000>	1,311,000	5,262,817	3,517,298	1,745,519
<50% AMI with less serious problems	2,662,000	1,795,000	867,000	4,213,250	3,058,890	1,154,359
<50% AMI with all problems	6,037,000	3,859,000	2,178,000	9,476,066	6,576,188	2,899,878
Low-income
<80% AMI with priority problems	3,713,000	2,331,000	1,382,000	5,812,348	3,972,297	1,840,051
<80% AMI with less serious problems	3,382,000	2,274,000	1,107,000	5,349,067	3,875,163	1,473,905
<80% AMI with all problems	7,095,000	4,605,000	2,489,000	11,161,416	7,847,460	3,313,956
Higher Income
>81% AMI with priority problems	177,000	137,000	40,000	286,722	233,464	53,258
>81% AMI with less serious problems	486,000	392,000	93,000	791,838	668,014	123,824
>81% AMI with all problems	663,000	529,000	133,000	1,078,560	901,478	177,082

Source: Stephen Golant, "Housing Problems of the Future Elderly, table 8.

Based on these assumptions, the Commission developed three possible rent-assisted unit growth scenarios (Exhibit 9):⁵⁰

Scenario One: For the number of rent-assisted units for senior households to expand at the same rate between 1999 and 2020 as that projected for senior renters, generally there would be a need for 1.6 million rent-assisted units in 2020.

Scenario Two: For the number of rent-assisted units for senior households to expand at a rate that maintains the same 1999 ratio of unassisted senior households with problems to rent-assisted units, there would be a need for 1.95 million rent-assisted units in 2020.

Scenario Three: Given the current shortage of rent-assisted units for those eligible, reducing the ratio of unassisted senior households with a priority or less serious problem from 5.8 to 1 to 5 to 1, there would be a need for 2.3 million rent-assisted units.

Exhibit 9: Subsidized Housing Projections

Current Status and Projection Assumptions	Total Households	Total Number of Owner-Occupied Households with Any Problems	Total Number of Unassisted Rental Households with Any Problems	Total Number of Owned and Unassisted Rental Households with Any Problems	Number of Rent-Assisted Households	Ratio of Unassisted Households with Problems to Rent-Assisted Households
Number of Age 65 and Older Households, 1999
Current Status, 1999	21,423,000	5,135,000	1,940,000	7,075,000	1,216,000	5.82
Projected Number of Age 65 and Older Households and Rent-Assisted Units in 2020
Rent-Assisted Unit Projection Scenarios
1. U.S. Census/Harvard Projected Household Growth trends (1999-2020)	34,932,000	8,750,642	2,582,995	11,333,637	1,619,032	7.0
2. Maintain 1999 Ratio of Households with Problems to Rent-Assisted Units	34,932,000	8,750,642	2,582,995	11,333,637	1,947,669	5.82
3. Proposed New Ratio of Unassisted Households with Problems to Rent-Assisted Households	34,932,000	8,750,642	2,582,995	11,333,637	2,266,727	5.0
Notes: Unlike previous household tabulations, these include senior households at all income levels.
The growth of all household categories, regardless of rent-assisted unit projection assumption, is based on U.S. Census-/Harvard-projected household growth rates.

Source: Stephen Golant, "Housing Problems of the Future Elderly," table 17.

The demand for rent-assisted housing will increase substantially. Programs such as Section 202, Section 8, Low-Income Housing Tax Credits, Section 515, and other Federal programs as well as State and local programs must be used to erase shortfalls and meet expanding need.

Given the large number of homeowners and the expressed desire of the vast majority of seniors to remain in their homes for as long as possible, meeting the needs of the nearly 9 million 2020 senior homeowners with housing needs in 2020 will be a daunting challenge as well. Some will be able to use home equity to finance improvements, accommodations, or relocations.⁵¹ For those with little equity or overwhelming housing problems, flexible forms of assistance, like those funded by the HOME and CDBG programs, will need to be expanded and targeted to help senior homeowners adapt and maintain their homes and avoid the rolls of more costly long-term institutional settings.⁵²

Future Health and Services Needs of Seniors

To predict the future number of seniors (age 65 and older) who will suffer from physical and cognitive limitations, the Commission assumes a declining annual disability rate based on recent studies and evidence.⁵³ That rate also assumes that the senior population will grow at the U.S. Census Bureau's intermediate rate of population projections.⁵⁴ Based on these assumptions, the Commission projects that by 2020 there will be 4.3 million seniors with IADL limitations, 3.6 million seniors with ADL limitations, and 3.6 million seniors with mental and cognitive disabilities. (Exhibit 10).

Exhibit 10: Number and Growth of Age 65 and Older Low-Income Persons Having Physical or Mental Disabilities, 1996 to 2020 (Incomes Below 150% of Poverty)

Type of Disability	1996	2000	2010	2020	1996 to 2000	2000 to 2010	2010 to 2020	2000 to 2020
Total Below 150% of poverty	8,249,452	8,603,591	9,636,990	12,952,292	4.3	12.0	34.4	50.5
No ADL or IADL disabilities	5,993,167	6,189,880	7,090,412	9,861,142	3.3	14.5	39.1	59.3
At Least one IADL disability	1,293,889	1,371,834	1,440,181	1,755,068	6.0	5.0	21.9	27.9
At least one ADL disability	962,396	1,041,878	1,106,396	1,336,081	8.3	6.2	20.8	28.2
With a mental disability	948,517	1,002,988	1,059,319	1,307,688	5.7	5.6	23.4	30.4

Source: Projections were computed by Tne Lewin Group. Note: Several important assumptions underlie the above projections. First, it is assumed that both the ADL and IADL disability rates will start to decline in the period 1997-2000 at an annual rate of 1.00%. This rate of annual decline is projected to decrease by 0.1% every five years through 2020. The annual rates of decline are as follows: 2000-2005, 0.90%; 2005-2010, 0.80%, 2010-2015, 0.70%, 2015-2020, 0.60%. It assumes that the older population subgroups with incomes under the 150% poverty level will grow at the same rate as the older population overall.

Further analysis of long-term care data developed by the Lewin Group indicates that 9.1 million seniors now utilize some level of personal care, ranging from skilled nursing to personal care in the home. The Commission projects that the aggregate need for such care will rise dramatically to approximately 12.5 million, although the increase will occur at less than the rate of growth in the senior population.

In addition to current service usage, Lewin provided the Commission with projections of future use based on their Long-Term Care Financing Model (LTCFM).⁵⁵ The LTCFM simulates nursing facility and home care use and expenditures for seniors age 65 and older to the year 2030. It permits analyses of alternative assumptions about the nature of the senior population in the future (e.g., declining disability rates) and policy scenarios (e.g., tax incentives for long-term care insurance or changes in Medicaid eligibility). Exhibit 11 shows current and future service use and needs.

The income level breakdown of those in need of services is critical, because in most instances, income level determines eligibility for government programs. Along with income level, knowledge of the range of services required is also important because it enables informed policy decisions regarding vital services that must be covered to ensure that the health and health-related needs of seniors are met.

Exhibit 11: Projected Number of Seniors Using Supportive Services, 2000 to 2020

Source: The Lewin Group analysis of Long-term Care Financing Model supplemented by the National Long-term Care Survey, prepared for the Commission on Affordable Housing and Health Facility Needs for Seniors in the 21st Century, March 2002.

In 2000, 4.1 million seniors with incomes below 150% of the poverty level required health and health-related services (Exhibit 12).⁵⁶ That number is expected to decline to 3.7 million in 2020 as a result of the decline in the number of seniors who fall within this population group. For those in the 150% to 249% of poverty range, 2.1 million required services in 2000. By 2020, that number is expected to nearly double to 4 million as a result of growth in this population. Under current policy, many in this group are not eligible for Medicaid.⁵⁷ This is critical because of differences in eligible services under

Medicaid and Medicare. Finally, of those with incomes that exceed 250% of poverty, 2.9 million currently require services: that number is expected to increase to 5 million in 2020. Although many in this group have sufficient income or insurance to provide for necessary services, a large number do not,⁵⁸ and the Medicare program does not cover most of the services required to meet the long-term care needs of eligible seniors.⁵⁹

Exhibit 12: Service Needs by Income Level 2000-2020

Source: The Lewin Group analysis of the Long-Term Care Financing Model supplemented by the National Long-Term Care Survey, prepared for the Commission on Affordable Housing and Health Facility Needs for Seniors in the 21st Century, March 2002.

A large percentage of those who live in rent-subsidized housing (27%) are likely to have service needs. The largest aggregate group of those in need of services is likely to be homeowners (Exhibit 13). This group faces two-fold challenges because their environment may not be conducive to service provision and they may face housing quality challenges that drain the income available to purchase services or necessary modifications. Finally, seniors who live in unsubsidized rental housing will likely face the challenge of both inadequate income and lack of access to services. Increased supply of service-rich subsidized housing would alter the distribution of those in need of services and those likely receiving such services.

The data indicate potential vast disparities between the number of seniors in need of services and the subsidized services available, either because of income or choice of residence. Although the statistics are daunting with many issues to be addressed, if the right policies are adopted and obstacles overcome, the housing and health needs of future generations of seniors can be addressed effectively.

Predicting Assisted Living Growth

Providing housing options for the growing number of seniors with disabilities will require markedly increased efforts to provide housing options that include supportive services. Because of the integration of housing and services found in assisted living facilities, we present projections of the growth in assisted living facilities for 2020.

Exhibit 13 - Projected Number of Seniors with Disabilities by Housing Tenure, 2000 to 2020

	Number of Persons
Dwelling Tenure and Type of Disability	1996	2000	2010	2020
Total Owners	26,202,110	27,158,000	30,399,000	41,232,000
No ADL or IADL	21,921,872	22,581,000	25,639,000	35,429,000
Any ADL or IADL	4,280,238	4,578,000	4,760,000	5,802,000
IADLs only, no ADLs	2,329,497	2,469,000	2,562,000	3,140,000
At least one ADL	1,950,741	2,109,000	2,198,000	2,662,000
With a mental disability	1,944,134	2,055,000	2,134,000	2,635,000
Total Unsubsidized Renters	4,536,431	4,858,000	5,610,000	7,692,000
No ADL or IADL	3,460,783	3,670,000	4,327,000	6,151,000
Any ADL or IADL	1,075,648	1,178,000	1,282,000	1,541,000
IADLs only, no ADLs	577,902	629,000	671,000	804,000
At least one ADL	497,746	549,000	611,000	737,000
With a mental disability	492,137	528,000	580,000	715,000
Total Rent-Assisted	1,320,098	1,397,000	1,610,000	2,235,000
No ADL or IADL	885,161	929,000	1,111,000	1,641,000
Any ADL or IADL	434,937	467,000	499,000	595,000
IADLs only, no ADLs	273,011	290,000	307,000	370,000
At least one ADL	161,926	177,000	192,000	225,000
With a mental disability	156,815	163,000	181,000	226,000
All Age 65 and Older Persons	32,058,639	33,328,000	37,619,000	51,159,000
No ADL or IADL	26,267,816	27,130,000	31,077,000	43,221,000
Any ADL or IADL	5,790,823	6,198,000	6,541,000	7,938,000
IADLs only, no ADLs	3,180,410	3,372,000	3,540,000	4,314,000
At least one ADL	2,610,413	2,826,000	3,001,000	3,624,000
With a mental disability	2,593,086	2,742,000	2,896,000	3,575,000

Source: The Lewin Group Projections from the 1996 Survey of Income and Program Participation, Wave 5, prepared for the Commission on Affordable Housing and Health Facility Needs for Seniors in the 21^st Century, 2002.

Estimating the growth and number of assisted living facilities in the year 2020 is a difficult task. The clientele of assisted living facilities can conceivably be seniors who would otherwise deal with their impairments in their homes or those who would otherwise occupy nursing facilities. Thus, the future demand for the assisted living facility alternative depends on other projections—the future number and share of seniors who will enter nursing facilities and those who will cope with their needs in their own homes. Estimating both of these needs is a challenging task in its own right.

Accurate predictions of the number of seniors who will be income and asset-qualified to enter these facilities are also required because the bulk of these facilities are not subsidized significantly.⁶⁰ This, in turn, requires predictions of the income distributions of future seniors and of the future cost of this alternative.⁶¹ In addition, corollary estimates of the number of seniors who will not qualify to enter these facilities on the basis of income, but will be able to pay for this alternative by way of intergenerational transfer payments from their children are also required.

The future supply of this alternative will also depend on State policies that regulate the supply of nursing facilities, the care requirements in assisted living facilities and the availability of affordable home and community based care. Many States have placed caps on their nursing home expansion, which suggests that institutional care alternatives will receive an increasingly smaller share of the long-term care dollar as States seek to accommodate their frail seniors less expensively through home- and community-based care alternatives and by subsidizing the cost of assisted living facilities.

Providers of assisted living facilities themselves have not been accurate forecasters. The industry badly misjudged the demand for assisted living facilities. In many regions of the county, markets are now overbuilt and oversaturated and have relatively low-occupancy rates.⁶² Thus, most of the major corporations have postponed often ambitious expansion plans. There have been many bankruptcies, and several company consolidations. Increasingly, a smaller group of corporations is controlling a larger share of ALF units throughout the country.

There are also three important senior consumer trends that suggest a dampening of demand for this alternative. The first is the aforementioned expected decline in the disability rate of the next generation of seniors with the obvious implications for future demand, although in absolute terms, the number of people with disabilities will increase. The second is the projected higher share of seniors who will be homeowners and the stronger attraction of the conventional dwelling as a place to accommodate their care needs. The third is the predicted slower growth of the age 75 and over group (and the 85 and over group) in each of the next two decades (2000 to 2010 and 2010 to 2020) than was the case in the 1990s.

Two projection scenarios are offered to predict the number of assisted living facilities in 2020. A third set of projection scenarios are also reviewed from the National Investment Center (Exhibit 14).

Scenario One

This scenario is organized around the following four assumptions:⁶³

1. The growth of the senior population (age groups 65-74, 75-84, and 85+) between 2000 and 2020 will be consistent with U.S. Census middle-series projections.⁶⁴



2. Between 1999 and 2010, the percentage of age 65 and older persons that occupy nursing facilities will remain unchanged.



3. Between 2010 and 2020 (but not between 2000 and 2010), an expected decline in the disability rate of seniors will depress the growth of seniors occupying nursing facilities with the result that a smaller percentage of this group will occupy this institutional alternative in 2020.



4. Between 1999 and 2020, the ratio of assisted living units to nursing home beds occupied by seniors will remain unchanged.

Exhibit 14: Assisted Living Facility Projection Scenarios of Number of Units Occupied by Age 65 and Older Persons in the United States, 1999 to 2020: Alternative Scenarios

Source: Scenario 1 and Scenario 2 are from Stephen Golant, Stephen, The Housing Problems of the Future Elderly Population: A Report Prepared for the Commission on Affordable Housing and Health Facility Needs for Seniors in the 21st Century. January 2002. NIC projections are from National Investment Conference, 2001, The Case for Investing in Seniors Housing and Long-term Care Properties. Annapolis, Maryland: National Investment Conference for the Senior Housing & Care Industries.

The 1.5 million nursing home beds occupied by seniors in 1999 are projected to grow to 2.2 million beds by 2020, an almost 41% increase. In 1999, there were about 2.9 senior-occupied nursing home beds for every senior-occupied assisted living unit. Maintaining this ratio (and growth rate) would result in the number of senior-occupied⁶⁵ assisted living units increasing from 507,414 units to 712,707 units between 1999 and 2020.

Scenario Two

This scenario is organized around the following three assumptions:⁶⁶

1. The growth of the senior population (age groups 65-74, 75-84, and 85+) between 2000 and 2020 will be consistent with U.S. Census middle-series projections.⁶⁷



2. In 1999, the age distribution of the assisted living population was as follows: 3% under age 65; 8.7% age 65 to 74; and 88.3% age 75 and older. Based on U.S. Census middle-series and Harvard household projections, the number of persons in each of these age groups will grow in size to 2020



3. Between 1999 and 2020, the disability rate of the older population will remain constant.

Using this methodology, there is a projected need that 507,414 units of assisted living occupied by age 65 and older persons in 1999 will grow to 755,302 or by 49% in 2020.

The National Investment Center (NIC) produced three alternative projections of the number of seniors likely to demand assisted living in 2020. These are referred to as conservative, base, and optimistic estimates.⁶⁸ The lowest number of seniors⁶⁹ occupying assisted living is predicted by the “conservative” projection and the highest by the “optimistic” projection.” All residents are estimated to be private pay. The optimistic estimate differs from the conservative demand model in that it assumes constant homeownership rates through 2010 and then somewhat declining homeownership rates; and it assumes fairly constant ADL deficiency rates between 2000 and 2010 and then a slow decline in these ADL deficiencies through 2020. An important new assumption of all three alternative projections is that income-eligible seniors may have annual incomes as low as $15,000 — and even lower — if they have assets greater than $50,000 (because they are capable of spending down these assets). The optimistic model assumes that between 2000 and 2020, the percentage of seniors with incomes greater than $15,000 or net worths of more than $50,000 will gradually increase. Based on these assumptions, the NIC estimates that from 674,000 to 875,000 seniors will want assisted living facilities in 2020, resulting in growth rates that range from 32% to 71%.

The allocation of resources by government and the private sector, as well as the incomes of seniors and the choices they make will greatly affect both the growth of assisted living and how the industry's product is shaped over the next 2 decades.

Challenges to Meeting Future Needs

The principal challenge to meeting future demand is the need for resources to address growing and changing housing and health requirements of seniors. Committed investment in affordable housing has declined over the past 3 decades⁷⁰ and resources devoted to Home- and Community-Based Services pale in comparison with resources dedicated to facility-based skilled nursing care. Below are the Commission's key findings on the challenges to addressing the growing affordable housing and health services crisis.

• One-third of senior households are expected to have housing needs;



• Almost one-fifth of seniors will likely have service needs, and current programs are not well structured to meet those needs;



• Current production of affordable housing does not meet demand;



• Subsidized rental units are being lost due to expiring Section 8 project-based rental assistance contracts and mortgage prepayments; and



• Federal housing and health policies are not synchronized, often leading to premature institutionalization as a more costly, yet practical option.

The Commission has developed numerous recommendations to address the health and housing challenges of a growing senior population. It is essential that these challenges be addressed before the Nation is overwhelmed with the needs of retiring Baby Boomer generation.

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