Fitch announced a continuing “deteriorating outlook” for not-for-profit life plan communities (LPCs) on June 25, along with nonprofit hospitals and institutes of higher education. Fitch’s rationale is that credit pressures on LPCs will worsen in the second half of 2024 due to ongoing labor and cost pressures.

Among the specific pressures, Fitch enumerated a slowing of real estate price growth—a factor LPCs depend on if prospective residents are going to be able to use home sale income to fund entrance fee payments. Although LPC’s occupancy has been growing over the first two quarters, Fitch fears that if LPCs continue to increase their entrance and monthly fee charges above historic norms, those positive occupancy growth trends, driven by consumer demand, will slow down.

In order for our sector to return to a neutral opinion, Fitch would want to see “demonstrable improvements” in the availability of labor and in the LPCs’ ability to raise fees above historic norms without an impact on occupancy, and a stabilization in the real estate markets.