Fitch Ratings-New York-23 June 2022: Fitch-rated life plan communities (LPCs) are able to absorb labor costs and other inflationary pressures in the near term, but persistent inflation that extends beyond 2022 would pressure margins, Fitch Ratings says.
Higher wages, food prices and construction costs are ratcheting up expenses, but LPCs have been able to pass on higher costs through rate and fee increases. Most of our rated LPCs implemented independent living (IL) rate increases well above the typical 3% yearly increase; a few were double-digit or enacted mid-year (off-cycle). Residents seem to accept higher fees for now, but IL occupancy and demand could soften if rate increases continue above historical norms, or if cost-cutting erodes service quality.
Demand remained strong during the pandemic, reflecting favorable underlying demographic trends. Pandemic-related challenges, namely sales and marketing disruptions, state-mandated closures and curtailment of elective surgeries that affected short-term rehabilitation referrals temporarily reduced IL occupancy, but overall occupancy continues to improve.