Capital Is Flowing Back Into Senior Housing, but Cost and Zoning Keep Many Projects on the Shelf

The senior housing industry has a straightforward supply problem: the baby boomer generation is reaching the age for senior housing at an accelerating pace, while new construction has yet to recover from a years-long post-pandemic stall.

Capital wants in. Developers and operators want to build. But construction costs, interest rates, land scarcity, and acquisition pricing that has crept toward replacement cost are keeping many projects from moving forward.

David Berrien, who joined Harbor Retirement Associates this year after more than nine years in development at Erickson Senior Living, describes a market defined by a gap between enthusiasm and execution. Investor interest is substantial, he says, but investors are deploying capital selectively.

A Crowded Acquisition Market

Acquisitions have become increasingly difficult for Harbor Retirement Associates, which operates close to 20 luxury, private-pay communities, most of them for third-party owners. Berrien describes the market as “frothy,” with sellers asking more for properties while the discount to replacement cost that once justified acquisitions continues to shrink. Of every ten deals that cross his desk, roughly one fits the company’s investment profile.

The primary obstacle on the acquisition side is competition from large real estate investment trusts. Welltower and Ventas, the two dominant senior living REITs, operate with a cost of capital that private operators struggle to match. That advantage lets REITs absorb inventory that might otherwise trade among smaller, regional companies. “If a REIT is looking at a particular acquisition property these days, it’s very hard to compete with them,” Berrien says.

Berrien’s concern is that if sellers continue to push asking prices higher into 2027, the pace of acquisitions could slow further. “There’s no meat left on the bone,” he says of many current listings. The value-add opportunities his company targets are harder to find at current pricing. These are properties in strong locations that need operational improvement rather than a full overhaul.

Construction Barriers

On the development side, the constraints run deeper than borrowing costs. Berrien points to three interlocking barriers: cost, land availability, and zoning resistance.

The cost picture is familiar across real estate, with tariffs, elevated building costs, and interest rates that have not come down as the industry hoped. But senior housing faces an additional challenge in local zoning opposition. Berrien describes a pattern in which operators enter zoning hearings expecting a receptive audience. Senior communities do not generate school-age children, do not add commuters to peak traffic, and serve a population most communities claim to want to house. The pushback comes from a different direction.

Senior residents do, however, call on emergency medical services more often, Berrien explains, and municipalities worry about the added strain on emergency response, hospital capacity, and water and sewer infrastructure. The resistance is particularly acute in denser East Coast markets such as New England and the Mid-Atlantic corridor, where barriers to entry are already high. “If it’s not already zoned for senior living or senior housing, you’ve got a lot of jurisdictions that just say we don’t want it.”

As the aging population grows, whether municipalities adopt a more open posture toward senior housing development will directly affect where and how quickly new supply gets built.

Demand Versus Viable Sites

The demographic tailwind is unambiguous, and Berrien calls it the industry’s biggest. The baby boomer wave is not a forecast. It is a current condition, with retirees entering the pipeline every month.

But translating that macro demand into individual site decisions is harder than it appears, particularly for luxury operators. When Harbor Retirement evaluates a potential development site, the analysis goes beyond standard population projections. The company examines average income, average assets, and average home values within a five- or ten-mile radius. The reason is practical: most of its residents fund care by selling a primary home they have owned for decades. If that home value does not support the cost of care in a luxury community, the site does not work.

That filter narrows the company’s options considerably and largely rules out secondary markets. “Going into the secondary markets, it is an option for a lot of operators, just not for us,” Berrien says.

Lender Interest Has Returned, Selectively

Willing capital, at least, is no longer in short supply. Berrien says the message at the National Investment Center for Seniors Housing & Care fall conference in Chicago in October was that capital is coming back into senior housing, and his company alone met with 20 debt and equity providers there. Lenders are willing, he says, but they are choosing projects carefully, and each one still has to pencil out.

That selectivity determines where new supply appears. A project moves forward only when the location, the demographics, the zoning, and the achievable rents all line up. “The stars have to align,” Berrien says. For the communities that need more senior housing, demand alone will not bring it; local openness to zoning may matter just as much as the return of capital.

About the Expert: David Berrien is Executive Vice President of Development & Acquisitions at Harbor Retirement Associates, based at the company’s home office in Vero Beach, Florida. He focuses on senior living acquisitions and development.

This article is intended for informational purposes only and does not constitute legal, financial, or investment advice. The views and opinions expressed herein reflect those of the individuals quoted and do not represent an endorsement of any company, product, or service mentioned. Readers should conduct their own due diligence and consult qualified professionals before making any investment decisions.