Three years and one pandemic later, senior housing is showing signs of life.

Demand among baby boomers is inching back toward pre-pandemic levels, The Wall Street Journal reported. How that demand will be met, however, is unclear thanks to a combination of staffing shortages and controversy surrounding private equity’s less-than-stellar track record in the senior community and nursing home sectors.

Staying Home

The reputation of nursing homes cratered as deaths mounted during the pandemic. In the first half of 2021, occupancy rates at senior communities in the 31 largest US markets dropped to a low of 78%, the WSJ reported. Today many seniors, especially those with serious healthcare needs, can no longer put off entering senior communities. By late 2023, occupancy rates had ticked back up to 85%, compared to 87% in the first quarter of 2020.

Though the need for nursing homes and senior housing certainly persists, residents are facing limited options, high expenses, and in some cases, poor caregiving:

• By the end of the decade, there will be roughly 14.5 million middle-income seniors aged 75 and older in the US, and about half won’t be able to afford private-pay senior housing, according to a 2019 study from industry organization the National Investment Center for Seniors Housing & Care.
• A 2021 report from non-profit the National Bureau of Economic Research found that eldercare facilities that have been purchased by private equity groups are more associated with higher patient mortality rates, fewer caregivers, higher management fees, and a decline in patient mobility. PE firms also tend to prefer to play in the shadows, but last fall the Biden administration ruled eldercare facilities that accept Medicaid and Medicare need to disclose their owners. 

Plus, nursing home choices are dwindling. By summer 2023, the US had 600 fewer nursing homes than it did six years prior, according to a WSJ analysis. 

Shake Down: In the most affordable market, the Southeast, independent living costs range from $1,650 to $6,435 a month, according to Brookdale, the largest senior housing provider in the US. But in the Northeast, get ready to shell out between $2,620 and $16,165. 

The median cost of assisted living in the US is about $5,300 per month, according to insurance firm Genworth. And don’t forget the endless bevy of extra fees. In their “Dying Broke” series, The New York Times reported on facilities that charge assisted living center residents and their families for every little thing, like $12 for checking your blood pressure. Ours is spiking as we type. 

The three most important factors in determining the desirability of a property: insurance, insurance, insurance. 

Amid an increase in severe weather events, insurance rates in the US are skyrocketing toward record highs, with homes in some regions becoming nigh uninsurable, according to a report out Monday from insurance-comparison platform Insurify. One key takeaway: Florida may not have a personal income tax, but its insurance market is killer.

Not-So-Sunny Sunshine State

Severe weather events are becoming ever more frequent. Last year, the US suffered 28 that caused at least $1 billion worth of damage each, according to the National Oceanic and Atmospheric Administration. That’s way up from the baker’s dozen per year average of the 2010s and the thrice-yearly events of the 1980s. Meanwhile, most weather forecasters are predicting an especially rough hurricane season in the months to come.

The storms are making landfall on the insurance market. Average US premiums have increased 20% across 2022 and 2023, and this year could bring another 6% rise, to $2,522, according to Insurify. Naturally, the damage is worse in areas especially prone to natural disasters:

• The projected average rate of home insurance in Florida will hit $11,759 by the end of the year, or a 7% increase from last year, Insurify estimates. Nearly 60% of residents said their personal finances are worse than a year ago, according to a November poll from independent polling company Cygnal.
•  Louisiana had the second-highest projected rate, at $7,908, while Oklahoma ($5,711), Texas ($4,437), and Mississippi ($4,482) round out the top five.

Florida is also home to six of the 10 most expensive cities for insurance rates, Insurify found. The state-run Citizens Property Insurance Corp., or a so-called insurer of last resort, is now the state’s largest insurer.

Out to Dry: Relying on the insurer of last resort beats the increasingly common alternative: skipping homeowners insurance altogether, whether by choice or otherwise. A study from the Insurance Information Institute found that 12% of American homeowners don’t have insurance, up from just 5% in 2015. Farmers Insurance exited Florida entirely last year, citing increased costs, while State Farm stopped issuing new insurance policies in California. Earlier this month, the company said it would not renew 72,000 policies in the state. Which leads us to ask: How bad can those Midwest winters be?

Now it’s up to UPS to supply proof of delivery profits. 

On Monday, United Parcel Service announced it will soon become the primary air cargo shipper for the United States Postal Service, replacing rival FedEx after 20 years out in the cold. Somehow all three entities claimed a win.

Special Delivery

USPS owns and operates zero planes of its own, so it relies on third-party private players to ship certain pieces of mail when necessary. But the economics of snail mail have changed. The agency has recently shifted much of its operations from planes to more economical trucks; more than 95% of its First-Class Mail and First-Class packages are moved by its ground network, according to USPS. 

That led FedEx, on its own drive to clean up costs, to begin seeing its relationship with USPS as more of a burden than a boon — setting the stage for Monday’s big news:

• USPS payments to FedEx ran just $1.7 billion in fiscal year 2023, down from $2.4 billion in 2020. While the USPS was the largest client for FedEx’s air-based Express segment, FedEx said it was prepared to walk away if terms for a new contract, due in September, did not improve.
• While terms of the UPS deal have not been disclosed, the company did call it a “significant” contract in its press release. In January, UPS announced full-year revenue guidance for 2024 below Wall Street’s expectations.

“It’s not a huge loss for FedEx, but it will impact their density,” Edward Jones equity analyst Faisal Hersi told Reuters. “You’re losing consistency in terms of revenue from a pretty significant partner, but it wasn’t the most profitable business for them.”

FedEx-Employees: Amid FedEx’s cost-cutting campaign is a reorganization to combine its air-based Express unit directly with its Ground unit. Without the USPS contract, the company may even lay off as many as 300 pilots, trade publication FreightWaves reported in January. Ouch.