Estimating the Demand for Senior Housing and Home Health Care
Anikeeff, Michael A., Journal of Real Estate Portfolio Management
Executive Summary. Recently released government data on nursing homes, board and care and home health care show that long-term care use after age 65 varies significantly by state. This study found that the use of care in a state is highly correlated with one particular variable: a state's population over age 85 (R = .96). In general, the model provides a good fit for the state data. However, New York uses more care while California and Florida use less care than predicted.
Estimates of supply and demand are fundamental to market and feasibility analysis, both of which precede actual development of new projects. Understanding the market for seniors housing on the state level is important to private sector developers and investors. In addition, state public sector policymakers need to understand the market demand because nursing homes, care facilities and related health finance policies are regulated on a state basis. Recently released data on the use of senior housing and home care at the state level provides the opportunity to develop alternative methods. This study uses the new data to estimate the need for formal long-term care.
The remainder of the study is divided into four sections: the literature review, the methodology and data, the results and the conclusions.
In seniors housing, the market is driven by the increasing frailty of the aging population and the consequent provision of housing, hospitality service, personal service and health care to help individuals maintain independence as long as possible (Mueller and Laposa, 1996). Industry analysts need a reliable estimate of how individuals in different locations use these facilities in order to determine if there is a need for more or less development and investment (Anikeeff and Mueller, 1998).
Previous studies by Sirrocco (1994), Delfosse (1995) and Anikeeff and Novitski (1998) suggest that the use of formal long-term care-nursing home, board and care and home health care differs by location. Sirrocco has presented the national and regional data on nursing homes and board and care. Delfosse's report provided additional state level information on home health care. Anikeeff and Novitski extended the nursing home and board and care data to individual states. State level data is important because each state sets policy for nursing homes and other seniors housing facilities within their boundaries. This study combines the data from previous studies for the first time and uses state level data for nursing homes, board and care and home health care, and provides an estimate of the demand for formal care by state for the first time using data from the National Health Provider Inventory conducted by the Census Bureau.
The use of nursing homes, board and care, and home health care is 77 per 1000 individuals over age 65 nationally (77/1000 total, 41.5/1000 nursing home, 6.5/1000 board and care, 29/1000 home care). However, when Sirrocco classified states into census defined regions he found significant regional differences (Sirrocco, 1994). Exhibit 1 shows a table of states and their region. The Northeast, with 91/1000, used all three services more than the other regions (nursing 42/1000, board and care 7/1000 and home care 42/1000). In addition to the Northeast, the Midwest with 84/1000 over age 65 was above the national rate. The Midwest relies more on nursing homes (54/1000), less on board and care (4/1000) and moderately on home health care (26/1000).
The South was just below the national rate at 74/ 1000 (versus 77/1000). The West was significantly below the national rate at 57/1000 (nursing 29/ 1000, board and care 10/1000 and home care 17/ 1000), and considerably below the Northeast rates (57/1000 versus 91/1000). The West used more board and care (10/1000 versus 6/1000), but less nursing home or home health care than the nation.
A number of authors have found that there are regional variations in the use of formal home care services (Kenny and Dubay, 1992) with higher use in the South and Northeast census regions, followed by the Midwest and West (Hing, 1994). …