Affordable Housing Shortage Could Leave DFW Seniors Out In The Cold

DFW faces a growing shortage of affordable senior housing just as the silver tsunami of residents 65 and older in North Texas is projected to triple by 2050.

With nearly 90% of Dallas-Fort Worth’s stockpile of senior housing occupied and little affordable product on the way, baby boomers turning 80 and older could be in for the fight of their lives when looking for affordable housing options in the years to come.

But building more will be an uphill battle, thanks to a lack of incentives, dwindling financing options and an industry that has become gun-shy about overextending itself after taking a battering during the pandemic years.

“If we don't act soon, this is going to become a full-blown crisis with our seniors,” Texas Rep. Rhetta Andrews Bowers said of the DFW status quo.

Senior housing projects in the DFW pipeline today are scant and filling up fast, according to senior housing data firm NIC MAP. And those that are coming to the market are aimed at well-to-do residents, with few developers stepping up to address the need for housing for cost-burdened seniors in the region.

That population is on a steep rise, hitting 69% last year in DFW. 

Developers say there isn’t enough financial incentive to build affordable senior housing, and they are looking for more help at the state level. That is a notion Bowers said she agrees with, noting there needs to be more outside-the-box thinking to solve the problem before seniors are left in the cold.

But there is another factor besides the growing number of residents 65 and up that is affecting senior housing in North Texas, according to Trinity Investors Managing Partner Dan Meader.

“This concept of the silver tsunami, this idea that 10,000 people a day turn 65 in this country, that doesn't mean shit,” Meader said. “One of the most important things in senior housing is the concept of acuity.”

Acuity refers to the level of care and support seniors need based on their health conditions and abilities. Senior housing offers different levels of acuity, including independent living, assisted living, skilled nursing and memory care.

Offering that range means higher price tags. And where demand is high, fewer developers are motivated to play in the affordable field. 

Meader illustrated the point by pointing to a trio of Trinity properties. The company opened a facility in San Clemente, California, where residents can see the ocean from their rooms. Demand and cost of living are high there, so it starts at $12K per month. Trinity charges around $6K per month in North Texas and $3,800 per month in Oklahoma City. 

“If you just want to live till you die and not worry about money, move to Oklahoma City,” Meader said. “If you want to live next to your children who live in North Texas … you’re going to pay that bill, the kids are going to pay that bill, or the estate’s going to pay that bill.”

Occupancy At An All-Time High

Following a huge drop-off in senior housing development during the pandemic, the U.S. needs more than half a million new units to meet the demand expected by 2030 — and DFW leads U.S. metros in that regard. 

While all 31 major markets NIC MAP tracks have seen occupancy rising in recent quarters, DFW’s nearly 88% occupancy was the only one that represented a record high during Q1.

The region had more than 1,200 new units on the way in Q1 from just 15 properties under construction, meaning demand could easily outlast supply in the years to come.

With an average rent of nearly $4,300 per month in DFW, midlevel affordable senior housing is the biggest hole that needs to be filled, Meader said. 

“It's been hard to build buildings over the last five years — really since Covid,” Meader said. “What we really need to recognize is it's going to be harder and harder to deliver lower-priced, medium-acuity housing.”

One of the best ways to get rents down and make senior housing more affordable is to eliminate the need for those properties to pay property taxes. To accomplish that, a development needs a deal with a municipality to waive property taxes or it needs to be owned by a nonprofit. 

“I'm a big believer that you've got to have sustainable profits in senior [housing] because we've seen so much pressure on labor,” Meader said. “If we can go out and not pay property taxes and obtain cheaper financing, that creates more opportunity for sustainable senior housing ownership.”

The need for more affordable senior housing is a concern Bowers hears regularly from her constituents in Texas House District 113, which is located on the east side of the Metroplex and contains portions of Dallas, Garland, Mesquite and more.

With many seniors living on fixed incomes, they are struggling to keep up with the rent, medical bills and everyday expenses. Bowers said North Texas has added to those concerns with a limited pool of affordable and midlevel senior housing.

Bowers said the legislature needs to boost funding for affordable housing programs, give developers incentives to build senior housing and help cut through red tape.

“We've got to prioritize our seniors’ needs over other projects,” Bowers said. “It feels like we've been talking about it for years and not getting anywhere. We need to do better, and that starts with making our seniors a real priority and not just a talking point.”

The Industry 'Got Hammered'

Senior housing projects can have a hard time penciling because they often can't get enough return on capital, according to Meader. 

“With Covid, we just really saw an industry that got hammered really badly,” he said. “You didn't see the front door swings — people were not willing to leave their primary residences, and then you saw huge increases in labor costs, insurance costs, all the things associated with running a senior housing facility.”

While those costs have leveled off, they have leveled off at a higher plain than before. 

“It’s still difficult in the current market environment to source construction financing for senior housing,” Meader said. “If you can get it, it's expensive, and for that reason, it’s still difficult in the taxable world and in the investment capital world for senior [housing] to pencil.”

One project going through that process now is the $31M McKinney Ranch Senior Living development on 3.7 acres in McKinney. The 110-unit project from Palladium received a resolution of support from McKinney City Council earlier this year. That was needed to apply for low-income housing tax credits from the Texas Department of Housing and Community Affairs.

Affordable senior housing can be built without those tax credits, but McKinney Housing and Community Development Director Margaret Li said they can be a major boost for projects, especially with the rise in housing costs.

“In terms of development, it's been very hard for developers to even build affordable housing, not just necessarily senior housing,” Li said. “So having things like the tax credits or having a tax exemption, those types of incentives are really helpful. I'm sure we're going to see more and more of them come forward.”

Another option to address the need for senior housing in North Texas is converting existing multifamily properties to serve those in their twilight years. It is a trend NIC MAP Senior Principal Caroline Clapp said the firm is seeing more of in other regions of the country. 

However, it isn’t something that works that often because of meaningful differences in construction requirements, Meader said.

“Old people cannot run out of burning buildings. They walk out of burning buildings or they get wheeled out,” Meader said. “It's a lot more complex than it looks, and that’s the way it should be.”

Ultimately, the impetus to increase the senior housing options in North Texas falls on developers. If they can find a way to get the projects to pencil, Clapp said she is confident they will be leased.

“If we can get construction to pick up again, it's a good thing that Dallas has a nice, strong occupancy rate that's increasing,” Clapp said. “That might attract more development there, where that's needed.”