Senior living operators are taking a more careful approach to resident rate increases in 2025 as higher revenue and lower costs push average margins higher.
In 2024, many operators increased resident rental rates for private-pay senior living units at a steeper pace, with some implementing double-digit increases.
Looking ahead to 2025, factors including improved occupancy and longer length of stay have given operators healthier revenue, and therefore more leeway in not forcing higher-than-normal annual rate increases.
But challenges in operations, along with lingering inflationary pressures in various expenses like staffing and food, remain in the forecast for 2025, and navigating the exact rental rate for a portfolio varies by market, community or multiple other factors relating to external competition and operational headwinds.
In 2025, senior living operators that talked to Senior Housing News – including Discovery Senior Living, Distinctive Living, Treplus Communities, Solera Senior Living, Willow Ridge Senior Living and CC Young – said they plan to set resident rental rates closer to pre-pandemic annual increases between 3% and 8%. But they still seek to enact double-digit rate increases in certain markets that remain competitive and in which operators have a strong brand presence.
Occupancy, margin expansion intersects with resident rate growth
Senior living operators have increased operating margins in the last four years, even if doing so has been a balancing act with rising resident acuity and associated costs.
Bonita Springs, Florida-based Discovery Senior Living saw “significant” improvement in the company’s margins in 2024, which has allowed the operator to pass along rate increases in markets across the U.S. that were either in line with or “better” than expectations, according to CEO Richard Hutchinson.
Occupancy increases in recent quarters have helped send margins even higher as more residents move into senior living communities and the rate of new construction remains lower than in the past.
“From a staff perspective and cost of running our business perspective, the rates we’re getting for what we’re doing are all two-thumbs up trending positively,” Hutchinson told SHN. “Occupancies are intersecting with rate growth and we’re starting to look like more normal margin profiles.”
In 2025, Hutchinson forecasted “double-digit” rate increases for Discovery in some competitive primary markets. He contrasted that with “small, single-digit rate increases” in communities that may have a slower pace of occupancy gains.
“We’re getting double-digits in some communities that are well-occupied and under-supplied with customers who value and are willing to pay for increased services,” Hutchinson said.
Hutchinson said Discovery leadership relied on market data analysis of its entire portfolio to guide where rates will head in 2025. Some ownership groups have sought a higher increase in markets that were unable to sustain a 10% or greater increase. Using that data, Discovery leaders were able to show that a double-digit increase might not pan out well for a certain market that could be performing below expectations, Hutchinson said.
“[Operators] must be careful in assuming large rate increases,” Hutchinson said, noting that current proformas of senior living portfolios could be relying on too steep of an increase in rental rates to reach stabilization. “So be careful.”
But some operators have taken a continued aggressive approach on rental rate increases in competitive markets, including Freehold, New Jersey-based Distinctive Living. Thanks to a recalibration of its care levels last year, coupled with substantial capital improvements being made to communities, CEO Joe Jedlowski told SHN the company is still able to drive certain community rate increases by 15% in competitive markets.
“We need to drive our product back to value,” Jedlowski said. “Putting $500,000 into a building and being able to drive rates by 15% or more, it’s a home run and it’s a home run for our capital partners.”
But demonstrating this value to customers is a tricky task. Operators are taking steps to improve both the physical characteristics of a portfolio while also bolstering operations to accommodate expanded health care services and improve the value of offered services.. But presenting value to customers also centers on being able to differentiate on lifestyle and wellness-driven programming for residents, Jedlowski said.
“There’s been a lot of intentional shifting that we’re doing as an organization to align ourselves with a hospitality mindset and a lifestyle mindset, so we’re bringing that to a more traditional [assisted living] model,” Jedlowski added.
Many ‘dimensions’ of setting rate increases
Operators that spoke with SHN said they will be more precise in implementing rate increases in 2025 and beyond.
Denver, Colorado-based Solera Senior Living is taking a varied approach on rate increases in 2025, CEO Adam Kaplan told SHN. He noted that the company wouldn’t implement blanket rate increases across its portfolio—but instead is using a sliding scale based on individual market characteristics to set rate increases.
“Commoditized markets are going to drop back to a normalized level and if you’re more service-driven, you’ll have the ability to push higher levels of increases,” Kaplan said. “Supply is going to have to factor into it so there’s a lot of dimensions.”
In 2025, Kapaln said he was still optimistic the company could pass through rate increases that are “above historical levels” that are in competitive markets while delivering increased lifestyle and health care services.
In the active adult sector, where length of stay is typically longer, operators have been able to make some more headway on rising rental rates. For example, rate increases at Columbus, Ohio-based Treplus Communities are dependent on the pace of renewals at its communities. On average, residents stay in Treplus active adult communities two or more years, according to Treplus CEO Jane Arthur Roslovic.
In setting active adult rates, Treplus has averaged 8% to 10% rate increases for new units, while increasing rental rate renewals on average 4% in 2024, Roslovic told SHN.
But she believes that operators’ quick rush to higher increases on rental rates between 2021 and 2023 may have negatively impacted the industry’s ability to meet customer demands for affordability and good value.
“I think long-run, that could have hurt us,” Roslovic said. ”Things are more expensive everywhere, and it holds true in senior living, too.”
For operators that deal in acquiring distressed communities and stabilizing them over time, setting increased rental rates can negatively impact an already steep climb towards census goals and operational performance. Albany, New York-based Willow Ridge is one such operator, having increased its total of communities to a dozen properties this year.
Willow Ridge in 2025 will average rate increases of 6% across its portfolio. That strategy represents a more careful approach to raising rates so as not to impact occupancy at recovering communities, according to CEO Michael Morris.
Looking ahead, Morris sees a senior living landscape in which 2% to 8% is where average rate increases could settle and become the “new normal” for operators nationwide.
“We’re not in a position right now to be testing the market, because some of these newer buildings are still in lease up mode,” Morris told SHN. “We’re inching towards stabilization, and it’s enough to get what we need from the operation, but it’s not going to push residents out the door.”
Recent data shows rate growth slowing
The information shared by senior living operators regarding rate increases in 2025 is in line with other recent industry data on rate increases.
A recent NIC report from this summer tracked how independent living operators have increased resident rates by 4.2% on average by March of this year compared to 2023, a decrease from when operators grew IL rates by 8.1% the prior year. Assisted living operators also increased rates by 4.4% in March of this year, a drop compared to 8.8% rate growth observed in March 2023. A similar decrease was reported in memory care, with memory care operators growing resident rates by 4.7% in March, down from the 7.7% increase reported in March 2023.
A recent CFO Hotline survey by Chicago-based investment bank Ziegler found that nonprofit senior living providers increased entrance fees on average by 5% in 2024.The largest increase in the dataset was 20%, enacted to “catch up after years of lower increases or no increases.”
The survey found that average monthly fee increases for independent living grew 4.38% in 2025, representing a lower rate of growth than both 2022 and 2023.
In 2025, entrance-fee increases of the 250 operators that participated in the survey will be an average of 4.6%. Regionally, the Midwest and West markets represented in the survey saw “slightly smaller” increases forcasted for 2025 while the Northeast and South regions were “slightly elevated” compared to last year’s increases.
Operators in the report identified the health of the U.S. housing market, an increase in capital improvements and broader cost-inflation pressures as the top three reasons for increased entrance fees in 2025.
Bild & Co., a marketing and analytics firm that looks to drive occupancy and revenue increases for senior living operators, has observed rate increases for 2025 between 5% and 7%. Operators on the higher side of rate increases are doing to become “even more dynamic” with regard to increasing levels of care billing, , according to Bild & Co. CEO Jennifer Saxman.
“Operators really need to make sure they have their finger on the pulse and operations and [are] talking to sales on exactly how to structure a rate increase,” Saxman said.
Operators that raise rates too quickly risk causing “sticker shock” among prospective residents and their families that can easily lead to ” hesitation and confusion,” Saxman said. But breaking through those challenges can be done through revamping sales practices and training sales staff to accurately communicate value associated with higher rates.
“The industry is not giving [sales teams] enough tools or we’re not preparing them to be able to sell it,” Saxman said. “One of the biggest things that we can do is to really make sure that we can live up to our care levels.”
Bild & Co. data from its operating clients shows an average of 7% rate increases, with some outliers with higher range of double-digit increases depending on a market, Saxman said, noting that the industry will likely continue to enact rate increases of 5% to 7% in 2025 and beyond.