Odin Says ...

Boom in Retirement Homes

Aug 25, 2009

The Montreal area has recently witnessed a tremendous construction increase in retirement apartment buildings.  Since 2003, nearly half of all new apartment complexes built in the city and its surroundings cater to seniors.

This trend reflects a particular social trend in Quebec, with its significant baby boom population, the largest in the western world, coupled with one of the lowest birth rates.  Real estate developers are obviously aware of this, and are building in anticipation of the coming demand in retirement housing, when the first boomers start retiring in 2011.

Most of these new developments are designed to cater for a new breed of "retirees", specifically the more autonomous kind with less need for assisted care.  The buildings are mostly big projects in the "luxurious" category.  Some of them feature full kitchens, mini-putt courses, bowling alleys and theatres.

Moreover, priced at around $1,400 a month for a one-bedroom apartment, the new buildings are expected to heavily hit both their occupants' solvency as well as that of the government.  The latter may not be able to underwrite the cost of housing and caring for those aging boomers, especially with rising life expectancies.  They will have to rely on their own savings, and not expect much from the government, during their golden years.  The Quebec government will be hit even harder since extending its home-caregiver tax credit to subsidize rental costs of retirement homes (20%, up to $2,000/month).

Many boomers have also suffered huge financial losses during the recent economic downturn, making it even harder to sustain such rents.  This may help explain the high vacancy rates those buildings are witnessing (close to 10%, where 3% is considered healthy).  The market has also been overbuilt, contributing more to those high rates.