We know we have the People’s Republic of California, and after New York’s Democratic Party primary, we may have the People’s Republic of New York City by November. The surprise winner of the primary was 33-year-old Zohran Mamdani. He is a self-professed Socialist, and more.
In addition to free bussing, freezes on apartment rents, higher taxes on the wealthy (already one of the highest taxed regions in the country) and government run grocery stores, he wants to implement a $30 an hour minimum wage for New York City. We suspect he has no idea what the impact would be on employers. We suspect he does not care.
But it could be different in the seniors housing industry. You may remember our white paper in September 2022, called Fixing Labor: A Long-Term Solution. It was quite lengthy with several recommendations, but one that sticks out was for an across-the-board increase in wages of 20% combined with a $20 per hour minimum wage in senior care communities. Obviously, if the lowest-skilled job paid $20, everyone else would have to get bumped up. We thought we would hear howls from the industry, instead, crickets. One of the goals of the recommendations was to help change the perception of seniors housing to become a leader in employee engagement, and wage rates. It would certainly help after the terrible PR during COVID.
Now, nearly three years later, with census, margins and profitability increasing in the post-COVID environment, combined with the lowest level of new development in a decade, providers have a lot more financial flexibility to start to really bump up wages and differentiate their operations. We are not saying a $30 per hour minimum wage, but getting close to $20 will be more realistic financially.
Because supply and demand are getting increasingly out of balance, and as national census levels start to top 90%, with some communities already at 100%, the ability to raise rental rates will only increase. Those higher rates should enable the provider to pay higher wages. Sure, the extra cash flow could go to investors, capex and paying down debt, but for long-term success, having a stable and well-paid staff will be key. As successful providers know, the priority is to have a healthy and happy staff. Once that is done, everything else falls into place, including higher resident satisfaction, which results in a better reputation, which results in continued strong census.
What providers don’t want is to be the subject of documentaries like the one that came out a few years ago called “No Country for Old People.” This film is focused on the nursing home industry, not seniors housing, and presents a very one-sided perspective, and is quite damning. Nevertheless, they are real people with real stories that paint a terrible picture of life and care in a nursing home. But instead of blasting the provider, they should be blasting the Medicaid system with its payment structure that in most cases does not fully cover the cost of care.
