Feasibility of senior housing markets

Demand for senior housing in Canada

As of 2020, Canada has approximately 2.88 million seniors aged 75 years and older, representing 7.6% of the total population, growing by an average rate of 3.5% annually over the past five years. This compares to the total population growth rate of 1.3% and is expected to continue growing over the next few decades as Baby Boomers reach the ages of retirement.

Provincial senior population growth

The distribution and demographic characteristics of the senior population vary across the country.

Ontario has the most seniors at approximately 1.12 million as of 2020 followed by Quebec with approximately 722,000 seniors. The two provinces make up approximately 39% and 25% of the total senior population in Canada, respectively.

Atlantic provinces and Quebec have a higher proportion of seniors versus the national average (between 8.3% to 8.8% of the total population in 2020), compared to 5.8% of the total population in Alberta.

Projected shift of provincial senior population

Of the nine projection scenarios prepared by Statistics Canada covering the coming decades by age and gender, the senior population (75+) is expected to grow to between approximately 4.41 to 4.75 million by 2031, representing a 48% to 58% growth over the current senior population, and to 5.79 to 6.65 million by 2041, or a 95% to 121% growth over the current senior population, depending on the projection scenario.

Alberta, British Columbia, and the Atlantic provinces are projected to have the fastest-growing seniors’ population with approximately 26% to 30% projected growth over the current population in five years and 51% to 70% growth in ten years in the medium growth (M3) projection scenario. Saskatchewan, Manitoba, Quebec, and Ontario are forecast to experience slower growth for the demographic than the national average generally.

Supply of senior housing in Canada

There is an expanding range of housing alternatives and service choices available to the senior population in Canada. The range of options is evolving, with living arrangements being developed to meet the needs of increasing numbers of healthier and wealthier seniors.

Private pay retirement residences offer multiple service types generally ranging from Seniors’ Apartments/Independent Living, Independent Serviced Living, Assisted Living, and Memory Care, while government funded senior housing is typically referred to as Long-Term Care (LTC) homes or Nursing Homes.

Retirement homes across Canada have generally recorded average occupancies in the low 90% range over the last decade before declining to 86% in 2021. British Columbia, Manitoba, Prince Edward Island, and Nova Scotia have outperformed the rest of the country in terms of occupancy in recent years. In addition, residences with heavy care space have been seeing higher occupancies compared to IL/ISL homes due to lower supply and residents choosing to remain in these spaces longer before transitioning to long-term care.

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Determining the affordability of senior housing across Canada

What is the average price of rent for senior housing?

The average senior housing rent for a Bachelor unit or private room in Canada was $2,649 in 2021 with a compounded annual growth rate of 3.4% since 2009, as per CMHC. The average rent for a heavy care space, defined as a space where the residents receive more than 1.5 hours of care per day, was $4,261 in 2021 in Canada and has grown by 2.4% annually since 2009.

When comparing to the average rents for a Bachelor apartment unit in Canada, the average senior housing rent for a Bachelor or private room is approximately three times average apartment rents while the average rent for a heavy care space is approximately five times greater than average apartment rents, reflecting the senior housing rent premium for meals, housekeeping, personal care services, activities, etc.

The most and least affordable provinces for senior housing

The cost of senior housing depends on the level of care required and the location.

Comparing senior housing rents to senior’s income across provinces, we find that the rent-to-income ratio was approximately 70% for a standard care private room and 119% for a heavy care space in 2019 in Canada and has been growing over the past decade. Excluding any effects of government subsidies to residents, the rent-to-income ratio for a private room was highest in Prince Edward Island and lowest in Quebec.

The rent-to-income ratio for a heavy care space was highest in British Columbia and lowest in Quebec. Based on the average senior housing rents and senior income distribution across provinces, we have ranked the affordability of standard and heavy care senior housing in Canada, respectively, as illustrated below.

Affordability rank for a private room

Affordability rank for a heavy care space

Analyzing the demand coverage ratio (DCR)

The DCR is a measure of the relationship between potential market demand and competitive supply. It is a general industry consensus that the market is in balance when the DCR falls at 2.0 for ISL/AL and 3.0 for /MC.

That is when there are two and three (age/income/need) qualified seniors for every unit of supply respectively for ISL/AL and MC. Based on the qualified demand model and supply analysis, we can determine if market support exists for additional supply and additional development is supportable without compromising competitive equilibrium in the market.

DCR conclusion

As outlined in the table above, the DCRs for the nine provinces in Canada included in this analysis range between 0.9 to 5.4 with an overall DCR of 2.0 in 2021. The DCRs for most provinces are around or above 2.0, indicating a balanced senior housing market. Based on the senior population growth forecast and the projected supply utilizing the historical CAGR growth rates, the overall DCR would gradually drop to 1.2 by 2031, as projected supply growth is higher than the anticipated population growth.

While this analysis considers overall DCRs, it is important to note that they are not necessarily reflective of the health of all the individual senior housing markets within the provinces, which can range from small town to a neighbourhood in a major urban centre. Senior housing markets in Canada are highly localized and it is imperative to analyze the specific conditions of the individual markets to determine if additional supply in that market can be supported.