Naturally Occurring Retirement Communities (NORCS): Why Pension Funds Should Understand And Support Them

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“NORCS are intergenerational communities that naturally evolve to house a significant proportion of older adults. Unlike purpose-built retirement homes, these communities emerge organically. For example in  Ontario, over 200,000 older adults live in NORC buildings – more than the total number residing in long-term care and retirement homes combined. This presents a unique opportunity to develop innovative, community-oriented solutions that support aging in place.”

NORC Innovation Centre, UHN

Aging in Place

Stating the obvious, the ‘aging’ topic covers a much broader range of subjects than just post-work income provision in the form of pensions. Pension funds should understand the broader context and its              implications as they interact with plan members. The importance of that understanding will grow as the proportion of people over age 65 in developed economies is projected to rise from 20% of the population today, to 25% by 2050.

Past Letters have explored the implications of this broader understanding of reality. For example, the title of our September 2022 Letter was “Your Hundred Year Life: A Film That Explains Why and How We Should Retire Retirement”. The Letter preceded the screening of a film with that name at the Rotman School of Management, University of Toronto on February 6, 2023.  Click HERE to view the film.

We noted the film made four key points:

1. There is more to aging than just how it could/should be financed. It also has important health and social consequences which deserve equal study.
2. On the work design side, an aging population requires understanding what is happening at both the supply and demand sides of labour markets. It also means supporting people through a series of transitions as they age. The standard working career span of 18-65 should be abandoned, and replaced with a new 5-95 ‘life model’.
3. On the health side, an aging population means age-related afflictions will become an increasingly important factor in health care provision.
4. On the habitation side, locations with high densities of older residents form naturally. This collective ‘aging in place’ presents the opportunity to cost-effectively scale up the delivery of personal care, habitation maintenance, and health care services. This concept has been named Naturally Occurring Retirement Community, or NORC for short. Toronto’s University Health Network (UHN) launched an initiative in 2022 to introduce the NORC concept in Toronto.     

This Letter takes a deeper dive into point #4, the NORC concept, and identifies ways in which pension funds can support and promote this powerful support mechanism for ‘aging in place’.

NORC Research Findings

What results has research on the NORC concept produced thus far? A 2022 article titled “NORCS: A  Scoping Review”ⁱ provides the answer. Based on a review of 60 US and 4 Canadian studies on the NORC topic, it reports:

• North Americans prefer to age at home rather than in dedicated aging institutions.
• The increased social support provided by NORCS reduces the incidence of isolation often experienced as people grow older, and increases their phyco-social well-being.
• NORC membership is associated with better physical health.
• With complex organizational structures involving internal staff, external partners, and government agencies, the management of NORCS is challenging, with financial sustainability high on the list.
• The article concludes with this observation: “NORCS show great promise in initial outcomes that benefit the health and well-being of older adults”.

With these broad findings in mind, the Letter now turns to the tangible progress made to date at UHN’s NORC Innovation Centre (NIC). The information was provided by NIC’s Jen Recknagel, Director of Innovation and Design.

The NIC Story To Date

Jen was one of the panelists invited to comment on the “Your Hundred Year Life” film at its 2023 showing at the Rotman School of Management. At that time, she described the founding of the NIC initiative and its aspirations.

Today, three years later, she provided this NIC progress report:

• NIC launched in 2022. Its goals are to support the health and well-being of NORC participants. Its work spans research, design, and policy development.
• NORC buildings are defined as apartments, condos, co-ops with 30% or more adults aged 65 or older.
• Now active in 30 NORCS in the Greater Toronto area supporting 4,000+ older adults.
• Partnering with 65+ different service organizations.
• Material health care cost savings have been achieved through efficient home care delivery. For example, the average annual cost per NORC participant has been $266. This compares to $359 for a single Emergency Department visit, $1100 per day in Acute Care, and $75,247 per year in a Long-Term Care Home.
• Secured $6M+ in research funding.
• Research results thus far: 81% of NORC occupants feel a sense of belonging, 78% have neighbours they can call on, 10% decrease in loneliness, early signs of physical and mental wellbeing, early reporting suggest a 63% reduction in Emergency Department visits after joining the program.
• Communities are actively seeking NORC support, often faster than NIC can respond.
• Expansion plans are currently being developed. The aspiration is to make aging in place both possible and sustainable. This means stronger connections , earlier support, and better conditions for aging in community
• We believe local delivery can be increasingly funded by public/system partners. However, ongoing funding for NIC itself remains a question. It needs this ongoing funding to continue to provide training, implementation support, and research for continuous improvement.

Note the close parallels between the broad research findings set out in the NORC Scoping Review paper, and the more specific findings set out in the NIC story to date.

Future NIC Funding

Recall that the broad NORC Scoping Review listed financial sustainability as an ongoing challenge for NORCS, and that the NIC story echoed that concern. This raises an important question. Why do organizations like NIC, which have shown to produce material cost savings in health care and habitation through the creation and maintenance of NORCS, have trouble funding their own sustainability and expansion? In our view, the answer is that without a direct financial connection between the material value being created by NIC-type organizations and their ability to finance its own operations, their sustainability would appear to depend wholly on adequate charitable giving, which can be problematical from a sustainability perspective.    

What would be a more reliable source of funding for NIC-type organizations? One such source might be funding from a government agency charged with promoting and facilitating the formation and management of organizations that produce material social and financial value at a low cost. Another funding source could be explicit NORC sponsorships by corporations seeking the attention of aging adults as potential clients/customers. Logical areas where corporate sponsors might be interested in such  sponsorship arrangements are groceries, financial services, health care products, and real estate.  

For completeness, this Letter also proposes consideration of a more radical funding model alternative, where pension funds become sources of funding and owning NIC-type organizations. The caveat with this approach is that pension funds are not charitable organizations. They are legally required to maximize return without taking undue risks. So in this funding model, NIC-type organizations would have to generate sufficient net income to meet pension fund return expectations. This could be done through charging a modest NORC membership fee. Even an annual fee of only $20 would generate material revenues with millions of NORC participants. Alternatively, the focus could be on developing the corporate sponsorship model to a point where it becomes a material revenue source.

Meanwhile, NIC has developed a growth model that foresees further NORC growth in the Greater Toronto area, and possibly extends into the rest of Ontario. Indeed, there may be growth opportunities right across Canada, possibly requiring the creation of additional NIC-type organizations. Pension fund sponsorship of these growth opportunities would make a nice analogue to the Canadian Pension Model story, which started with the Ontario Teachers’ Pension Plan in 1990. From there, the Model traveled across Canada, and is now making its way across the world. 

In short, the NORC Innovation Centre at the UHN could be the start of a NORC development chain that also makes its way across Canada and then the world. Broad pension fund advocacy, sponsorship and ownership in the NORC space could facilitate the realization of this vision.  As frontline guardians of the financial security of their plan members, such pension fund advocacy would be a logical extension of their fiduciary duties.        

Keith Ambachtsheer

Endnotes:

1. Parniak, DePaul, Frymire, and Donnelly, “NORCS: Scoping Review”, JMIR, 2022

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The information herein has been obtained from sources which we believe to be reliable, but do not guarantee its accuracy or completeness.