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Seniors housing fundamentals were greatly impacted by the ongoing COVID-19 pandemic in 2020, with the 

occupancy rate falling to an unprecedented record low due to remarkable levels of negative net absorption, 

according to data from the National Investment Center for Seniors Housing & Care’s NIC MAP Data Service. Rent 

growth on an annual basis managed to remain positive for the year despite the market environment, though the 

pace of growth slowed each quarter.

The pandemic continued to greatly impact the seniors housing sector throughout 2020, especially when infections 

hit new record highs late in the fourth quarter. The continued decline in occupancy was attributable to both a high 

level of move-outs and continued delivery of new units despite the weak demand. The rollout of vaccines late in the 

fourth quarter was a positive step for the sector, particularly since its workers and residents have generally been 

given priority in receiving them, and recent data shows that infections have declined sharply in skilled nursing 

homes. However, seniors housing operators are expected to have higher expenses for protective equipment and 

weaker-than-expected demand for most of 2021, and even into 2022.

Multifamily Economic and Market Commentary

March 2021

Seniors Housing Fundamentals Severely Impacted in 2020

Seniors Housing Rental Market Fundamentals

According to data from NIC, seniors housing 

occupancy fell to another record low in fourth 

quarter 2020, though the rate of decline eased 

from earlier in the year: Occupancy declined 7.0% 

in 2020 to 80.7%. Underlying segment trends were 

similar: Majority Assisted Living (AL) declined 

7.7% to 77.7% and Majority Independent Living 

(IL) declined 6.3% to 83.5%.

Annual rent growth slowed as well, declining 

1.6% from 2019 to 1.4% for 2020. The underlying 

quarterly trends for IL and AL were also similar: 

Majority IL rent growth slowed 1.8% to 1.4% and 

Majority AL slowed 1.5% to 1.3%. 

Quarterly data from NIC on rent levels indicate 

that seniors housing overall, as well as Majority IL, 

managed to maintain positive quarter-overquarter rent growth throughout 2020. But 

Majority AL experienced quarter-over-quarter rent 

contractions in second and fourth quarter 2020, 

though both contractions were under 0.1%. 

Total seniors housing absorption was negative 

during most of 2020, according to NIC, though the 

size of the decline eased after the initial shock in 

the second quarter. Total seniors housing 

absorption was -30,319 units over the course of 

the year. The underlying segments experienced 

similar trends: Majority IL absorption was -13,907 

units, while Majority AL contracted by -16,412 

units.

75%

80%

85%

90%

95%

Occupancy Levels by Property Type – Q4 2020

Seniors Housing Majority Independent Living Majority Assisted Living

0%

2%

4%

Annual Rent Growth by Property Type – Q4 2020

Seniors Housing Majority Independent Living Majority Assisted Living

-10,000

-5,000

0

5,000

Quarterly Absorption by Property Type – Q4 2020

Majority Independent Living Majority Assisted Living

Source: NIC MAP Primary Markets
$0

$1

$2

$3

$4

$5

$6

$7

$8

Billions

Sales Volume – Q4 2020

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Multifamily Economic and Market Commentary

The number of units under construction 

decreased over the course of 2020 to 36,254 

at year end, the lowest level since fourth 

quarter 2015, based on data from NIC. The 

total number of units under construction is 

down 22.7% from the end of 2019. Underlying 

segments both decreased, with the decline 

continuing to converge: the number of AL 

units under construction is down 22.6% 

compared to 2019, while IL units are down 

22.7%. The overall number of units added to 

seniors housing inventory in 2020 decreased 

only slightly, to 18,373 units, down from 

18,470 units in 2019. 

Subdued Transaction Activity in 2020 

According to Real Capital Analytics, total 2020 sales volume was $6.1 billion, a decrease of 51% over 2019 and the 

lowest annual volume since 2010. Fourth quarter 2020 seniors housing sales volume was down 7.1% from the 

prior quarter, to $1.3 billion, and down a stunning 67% from a year ago. The preliminary seniors housing average 

cap rate increased to 7.6% in fourth quarter 2020, up from a revised 5.6% in the prior quarter and 6.6% for 2019, 

and the highest-level since the end of 2016. The average cap rate for the full year of 2020 was 6.5%, which is an 

increase from 6.0% for 2019, but down from 6.9% in 2018. 

Buyer composition shifted toward private entities in 2020, according to Real Capital Analytics. Private buyers 

saw the largest increase in share, accounting for 61% in 2020, up from 44% in 2019. Publicly traded entities 

saw a modest decrease at 17% of 2020 transactions, down from 22% in 2019. Institutional buyers, like 

pension funds, were 19% of sales volume after accounting for 30% in 2019.

Source: NIC MAP® Data Service Primary Markets

Source: Real Capital Analytics

0

10,000

20,000

30,000

40,000

50,000

Units Under Construction by Property Type – Q4 2020

Majority Independent Living Majority Assisted Living Seniors Housing

5%

6%

7%

8%

9%

10%

11%

Cap Rate/Yield – Q4 2020
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Multifamily Economic and Market Commentary

Primary-Secondary Market Performance Similar

Occupancy levels in secondary markets (32nd to 100th in size according to NIC MAP) declined 6.2% in 2020 to 

81.4%, the lowest level on record, though the rate of decrease slowed after the initial shock in the second quarter. 

Rent growth in the secondary markets in 2020 eased but remained positive, with the secondary markets 

decreasing 1.1% from the 2019 growth rate to 1.8%.

Source: NIC MAP® Data Service

Metro-Level Assisted Living Performance Mixed

According to data from Moody’s/REIS, Inc., majority AL performance was surprisingly mixed among the nation’s 

larger inventory AL metros. Despite the pandemic, numerous metros, such as Boise, Portland OR, Des Moines, and 

Austin managed to show slightly improved rent growth compared to 2019. But several metros, such as Fairfield 

CT, Suburban Maryland, Dayton, Norfolk, and New Haven, experienced overall rent contractions in 2020.

From a vacancy perspective, each of the 80 largest markets in the country experienced an increase in vacancy in 

2020, but as can be seen in the chart below, to very different degrees. San Francisco experienced only a modest 

increase compared to 2019. The remaining top five most highly occupied markets -- Hartford, Buffalo, Albany, and 

Oakland -- saw more noteworthy increases but had vacancy rates below 15%. The five most vacant markets, 

including Detroit, Memphis, Austin, Suburban Maryland, and Columbia SC, all had significant increases of more 

than 7.5%.

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

Select Metro AL Rent Growth – 2016-2020

2016 2017 2018 2019 2020

Source: Moody’s/REIS, Inc. – select metros include 80 highest AL inventory metros

0%

5%

10%

15%

20%

25%

30%

Select Metro AL Vacancy – 2015-2020

2016 2017 2018 2019 2020

80%

82%

84%

86%

88%

90%

92%

Occupancy - Primary vs. Secondary – Q4 2020

Primary Markets Secondary Markets

0.0%

1.0%

2.0%

3.0%

4.0%

Rent Growth - Primary vs. Secondary – Q4 2020

Primary Markets Secondary Markets
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Multifamily Economic and Market Commentary

Outlook

Seniors housing was battered by the COVID-19 outbreak in 2020. Negative absorption throughout the year 

resulted in the weakest occupancy on record, though the rate of decline eased somewhat later in the year. Rent 

growth slowed throughout 2020, but the growth rate was positive in every quarter, indicating that there remains 

some foundational demand for the housing type. Construction activity further eased from the highs achieved 

several years ago but remains elevated from a historical perspective. The pandemic, and the virus’ particularly 

high mortality rates for older people, coupled with images of seniors housing being invaded by the virus while 

isolating the residents from their loved ones, is still expected to have a dramatically negative impact on the sector 

in the near-term. While there appears to be progress in combating the pandemic (vaccinations, for example, are 

well underway for much of the senior citizen population) we expect that many seniors may be reluctant to move 

into facilities in the near term, with occupancies falling and rent levels facing strong downward pressure over the 

next 12-18 months.

The demographic wave of aging baby boomers entering their 80s continues to be a potentially powerful engine for 

longer-term seniors housing demand. But the beginning of that wave is likely still several years away. Once the 

seniors housing industry makes its way through the current pandemic, we expect it could be entering some of its 

strongest ever years of demand, with the population of people over 80 expected to double over the next 20 years. 

However, we believe that the industry will have to contend with the fallout of the current crisis before its longterm prospects can be realized or more accurately forecasted. 

Metro-Level Independent Living Performance Also Varied

-4%

-2%

0%

2%

4%

6%

8%

Select Metro IL Rent Growth – 2016-2020

2016 2017 2018 2019 2020

Source: Reis, Inc. – select metros include 80 highest IL inventory metros

0%

5%

10%

15%

20%

25%

30%

Select Metro IL Vacancy – 2016-2020

2016 2017 2018 2019 2020

Majority IL rent performance was also mixed among the nation’s 80 highest inventory IL metros, according to data 

from Moody’s/REIS, Inc. Raleigh-Durham reported the highest rent growth rate in 2020, with a significant 

improvement over 2019 results. Wichita KS, Fort Myers, Madison, and Tucson were the other Majority IL rent 

growth leaders, with each reporting substantial improvements. Among the lagging metros, Columbus, Boise, 

Hartford, Fairfield, and Albany each experienced modest rent contractions.

As was the case for Majority AL, each of the 80 largest markets in the country experienced an increase in Majority 

IL vacancy in 2020, but again to very different degrees. Allentown, San Francisco, and Oakland saw just modest 

increases in vacancy in 2020, while San Jose and Suburban Virginia saw more notable increases, though they were 

among the five lowest vacancy markets. Cleveland, Columbia SC, Fairfield, Charleston SC, and Louisville recorded 

the highest vacancy rates at the end of 2020, all of which saw substantial increases over the course of the year, 

and all of which experienced vacancy rates of over 20%.
Multifamily Economic and Market Commentary

Tim Komosa

Economist - Senior Manager

Multifamily Economics and Research

March 12, 2021

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae’s Economic and 

Strategic Research (ESR) Group included in these materials should not be construed as 

indicating Fannie Mae’s business prospects or expected results, are based on a number of

assumptions, and are subject to change without notice. How this information affects Fannie 

Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, 

estimates, forecasts, and other views on information it considers reliable, it does not 

guarantee that the information provided in these materials is accurate, current, or suitable 

for any particular purpose. Changes in the assumptions or the information underlying these 

views could produce materially different results. The analyses, opinions, estimates, 

forecasts, and other views published by the ESR Group represent the views of that group as 

of the date indicated and do not necessarily represent the views of Fannie Mae or its 

management.

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