Active Adult Rental Housing Is an Emerging Trend
 A variety of age-qualified rental products are available today offering senior renters a wide spectrum of financial and service characteristics. Some rental communities offer very few services. Others offer extensive packages. And still others serve independent senior renters.
How the Senior Rental Market Has Evolved In terms of the senior independent rental market, early communities were financed through the HUD Section 202 program ― low-income housing tax credits. These communities offered modest, affordable efficiencies or one-bedroom units. During the past decade, the senior rental market has evolved in order to appeal to and address the needs of people with somewhat higher incomes. To do this, communities were financed through bonds and 4% tax credits and offered at least 20% of their units with two bedrooms. These communities also offered both mixed market-rate and tax credit units. Appealing to the Active Adult Market Recently, we have seen the beginning of a further evolution of the senior rental market to appeal to active adults and aging baby boomers. Unlike older senior rental products designed to respond to the physical limitations of aging households, these new active adult rental products are designed to respond to the lifestyle preferences of prospective residents. How fast is the market growing? - During the past five years, the number of 55-64 households increased by 3 million and households 65 and older increased by 1 million.
- During the next five years, the demand for 55-64 households will increase by another 3.3 million and an additional 2 million for the 65 and older market.
- This demand is driving almost every market in the country to offer age-qualified or age-targeted communities. Products in these communities are ranging from condominiums and villas, to attached homes with first floor master bedrooms.
- Some of these households also are buying second homes. Based on a recent survey by the National Association of Realtors®, the typical second home buyer is 55 with an income of $71,000. One quarter of these second home buyers spend more than six months a year at their second home. Sixty three percent buy vacation homes within 100 miles.
Some of those buyers also choose to rent in a lifestyle rental community and place equity into a vacation home that may eventually be converted into a retirement home.
Where Market-Rate Active Senior Rental Housing Is Successful Market-rate senior rental housing does not work in all markets. Markets must have a strong economic base to support this level of housing. Typical markets in which these projects have been successful include: - Affluent Suburban Markets
These are mature, affluent suburbs that ring major metropolitan areas ― examples include Suffolk County, N.Y.; Plano, Texas; Orange County, Calif.; and Columbia, Md. These markets typically are growing 1.5%-2% annually. Most of the potential renters currently live in the area and are looking to downsize after selling their homes. These are active households with some still working. Some rent because they are postponing their decision to buy in a resort-type retirement home. Others rent because they are splitting time between two destinations. After they sell their homes, most want to live in larger units — more than 700 square feet for one bedrooms and more than 1,000 square feet for two bedrooms ― for their furniture and to accommodate guests.
- Exurban, Affluent Markets
These communities are located in rapidly growing — more than 2% annually for all households ― emerging growth areas that have leapfrogged beyond established suburbs. Examples include Ladera Ranch in Orange County, Calif., McKinney in Collins County, Texas, and Terrell in Kaufman County, Texas. Rather than meeting the needs of an existing senior base, these markets support a base of established, affluent 40-55 year-old households whose parents are starting to age and require additional attention. These rental communities are attracting aging parents who want to live closer to their children. Because these residents are not bringing as much furniture or accumulated belongings with them, smaller units — 550-650 square feet for one-bedroom units and 850-950 square feet for two bedrooms ― are more acceptable.
This is a product that is just beginning to emerge and will surely evolve in the coming years. Robert Lefenfeld is a principal of Real Property Research Group, Inc., a market research firm with offices in Columbia, Md., and Atlanta. Lefenfeld is a featured speaker at Building for Boomers & Beyond: Seniors Housing Symposium on May 16-18 in Chantilly, VA. He can be reached at bob@rprg.net. | 
