Long term care homes in Ontario
Ontario’s demographic profile
Ontario is Canada's second largest province, covering more than 1 million square kilometres (415,000 square miles). Ontario is Canada’s most populous province. With a population of more than 13.5 million, Ontario is home to about 2 in 5 Canadians.
The median age for Ontarians is about 40 years. The life expectancy is about 79 years for men and 84 years for women. Seniors (65 years and older) are the fastest growing age group in Ontario. In 2016, 16.4% of Ontario’s population was 65 years or older. By 2041, it is projected that this segment will make up 25% of Ontario’s population.
Supportive housing options in Ontario
As part of Canada’s universal, publicly funded health-care system (Medicare), hospital beds are fully funded by the government. However, hospital stay is a temporary solution rather than a long-term one, as the hospitals are constantly pressured to move patients out of hospital and into long term facilities to cut costs.
There are three main types of long term supportive housing options for seniors in Ontario: Long-term care home, Home & community care and Retirement home.
Home & community care
Seniors who choose to retire in the comfort of their own home may apply for community care, where volunteers or health care professionals provide in-home services on a regular basis.
A wide range of services are available, such as nursing care, personal care, homemaking and end-of-life care at home.
Depending on the type of service and income level, seniors may be eligible for full government subsidy or a partial subsidy via co-payment.
Long-term care home
Long-Term Care (LTC) homes (both municipal and private) are substantially funded and regulated by the Ministry of Long-Term Care (MOLTC).
LTC homes provide 24-hours nursing/personal care, on-site monitoring, meals, housekeeping and laundry service. It is the most ideal option for seniors who require round-the-clock assistance or nursing care due to physical or cognitive impairment.
As LTC homes are heavily subsidized by the provincial government (65% to 75%), the maximum private premium payable by a resident is capped at C$2,702.
Retirement homes are privately paid residency for seniors who can live independently with little or no outside help.
Retirement homes are often equipped with recreational facilities such as retail shops, beauty salon, swimming pool, library and gardens. Some retirement homes offer professional staff to help with medical needs or daily living, with additional surcharge.
Residents of retirement homes pay between C$1,500 and C$6,000 a month, with no funding from the government.
LTC landscape in Ontario
Ontario is home to 77,000 long-stay beds and 626 long-term care homes; 16% are publicly owned, 57% are owned by private for-profit organizations and 27% are owned by private not-for-profit organizations.
LTC home revenue model
In Ontario, operation of LTC homes is 100% funded by the MOLTC. This covers expenditures such as nursing expenses, food expenditures and costs of programs and support services.
On the other hand, accommodation costs will be paid for via a co-payment scheme with the provincial government. Under the co-payment scheme, the maximum monthly rate payable by a resident is C$2,702 (Long-stay Private accommodation).
There is vast room for growth in the Ontario LTC sector due to aging demographics, demand/supply imbalance and the need for replacement of aged LTC stock.
Canada, like many other developed countries, are experiencing the effects of an aging population. As LTC is the most cost-efficient solution for seniors with care needs, the government is committed to support the construction of 30,000 new LTC beds over the next decade.
In Ontario, there is a severe demand-and-supply mismatch of LTC homes. The wait list for long-stay beds, as of 2017, is approximately 36,000. Even though the government plans to issue 30,000 new LTC bed licenses over the next decade, the supply shortfall is estimated to increase to 66,000 beds by 2028.
In addition to the lack of supply, the current stock of LTC homes is aged, with ~32,000 older-style (> 20 years old) beds still in use. The Covid-19 pandemic has exposed the vulnerability and obsolescence of the aged LTC facilities in Ontario, and the government plans to have all of these Class B and C homes rebuilt by 2025.
With substantial construction funding and issuance of new licenses by the provincial government, the return on investment and economies of scale are significantly improved for developers of new LTC homes.
Conclusion: Long-term care homes as a quality real estate investment
The For-Profit LTC home market lies in the investment sweet spot for private equity and real estate funds, with a reliable government-backed revenue stream backed by strong demographic trends.
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