Care homes alone cannot meet Hong Kong seniors' demand

Hong Kong is undergoing a demographic transformation: by 2036, one in three residents will be aged 65 or older, creating urgent demand for diverse and sustainable senior housing. Yet the current supply remains fragmented and insufficient.

In 2019–20, elderly care, medical and health services, and financial assistance collectively accounted for 20.8% of Hong Kong's total government expenditure, according to the Legislative Council Secretariat.

This underscores the importance of supporting the ageing population, not only with direct service provision but also by improving their living conditions.

By receiving better housing and community support, retirees can maintain their physical and mental well-being, which in turn may reduce long-term government spending on elderly care.

However, Hong Kong's high cost of living and unaffordable housing market leave seniors with limited options for quality retirement living.

• residential care homes for the elderly (RCHEs) – regulated under the Residential Care Homes (Elderly Persons) Ordinance, subsidiary regulations and code of practice – which are commonly located in residential buildings, lower floors of public housing estates, lower zones of retail spaces within mixed-use residential developments and purpose-built senior housing
• privately owned residences comprising either serviced apartments or apartments tenanted by independent seniors.

According to the Social Welfare Department (SWD), there were 819 licensed RCHEs in Hong Kong as of June 2025, offering a total of around 79,423 residential care places across various categories.

This represents approximately 26% of the seniors market, considering that 306,000 elderly people indicated a need for long-term care in the latest population census.

Such RCHEs include subvented, contract, self-financing and private homes (defined below). Some of these enjoy government subsidies including the Enhanced Bought Place Scheme (EBPS) and the Residential Care Services Voucher Scheme (RCSVS).

In contrast, the private senior living market – offering independent living with lifestyle amenities and optional care services – remains nascent; as of 2024, only six developments catered to this segment, providing about 1,700 units.

Projects such as Jolly Place (243 units), Cheerful Court (333 units), Tanner Hill (588 units), Blissful Place (321 units) and Chung Yuet Lau (64 units) have been built by the Hong Kong Housing Society (HKHS).

Given their high quality, these projects were designed for middle-income to affluent seniors, operating under a lease-for-life model where applicants pay an entry contribution and are granted long-term residence without monthly rent.

Ventria Residence (168 units) meanwhile represents a recent attempt to introduce high-end, hospitality-based models, with membership, debenture and all-in-one monthly rental model developed by a private company.

However, the private market remains small, especially for middle-income seniors. Therefore, the government has a plan to encourage more choices for citizens, and has committed to providing more land for elderly care facilities that are integrated with medical, retail and recreational infrastructure.

Kwu Tung North, for example, is earmarked for senior housing development as part of the government's Northern Metropolis, announced in 2021. The Kwu Tung North Multi-Welfare Services Complex is a pilot for this vision, reflecting a shift toward people-centred design and smart infrastructure.

Subvented homes, for instance:

• are operated by non-governmental organisations (NGOs)
• receive direct government funding to provide subsidised residential care services
• are managed by the NGOs themselves, following SWD guidelines and service quality standards
• are designed for elderly persons assessed by the SWD to have long-term care needs and who are eligible for subsidised care.

Contract homes in turn:

• are run by NGOs or private operators
• operate under service contracts awarded by the SWD through open bidding
• are managed by operators themselves under strict performance and service level agreements set by the SWD
• provide subsidised places to eligible elderly persons, under government oversight.

Meanwhile, self-financing homes:

• are typically run by NGOs or non-profit organisations
• operate without subsidy and are funded through resident fees
• are managed independently by the operating organisation but may participate in schemes such as the Nursing Home Place Purchase Scheme
• are designed for elderly residents who can afford to pay for care without government subsidy.

Private homes in contrast:

• are owned and operated by private entities
• are entirely self-funded from fees charged to the residents
• operate as private businesses, though they must comply with licensing and regulatory standards set by the SWD
• are open to all elderly individuals, with some benefiting from subsidised places under the EBPS.

Each of these models plays a distinct role in Hong Kong's elderly care system, with varying degrees of government involvement, financial models and service standards.

Grade 1 (classified as EA1 under the EBPS) requires higher service standards, including a minimum floor area of 9.5m² per resident – comprising bedroom space, shared and common areas, and circulation space within the home – and more professional staffing.

The latter entails five nurses, one physiotherapist or occupational therapist, four health workers, 20 care workers and 11 ancillary workers for 100 residents.

Grade 2 (classified as EA2 under the EBPS) has slightly less stringent requirements, with 8m² of floor space per resident and fewer professional staff, meaning there need only be nine health workers and eight ancillary workers for 100 residents, with no requirement for a physiotherapist or occupational therapist.

These grades reflect the level of care and facility standards provided by private RCHEs participating in the EBPS.

Separately, the RCSVS offers up to $2,094 (HK$16,435) per month in government subsidy per eligible individual, adding another layer of support for residents and operators alike.

• converted flats in private buildings
• retail podiums of mixed-use developments
• purpose-built care facilities
• public housing estates.

Location is influenced by land availability, zoning and accessibility to community services.

Many RCHEs lease their premises rather than own them outright. While this model allows flexibility it can also lead to challenges in meeting licensing requirements, especially in terms of space and safety standards.

Some premises may be leased, provided or allocated by the government. Traditionally, many of these facilities have been located in public housing estates.

In recent years, though, as part of private residential and commercial land sales the government has required developers of larger sites to include Government, Institution and Community (GIC) facilities and return them to the government on completion. These spaces can then be allocated for contract or subvented homes.

This initiative has helped provide higher-quality, purpose-built spaces contributed by the private sector and better integrated into urban areas. However, some private developers consider themselves overburdened by the government, particularly during the current market downturn.

With developer confidence at a low and lukewarm responses to government land sales over the past two years, concerns have been raised about the sustainability and fairness of this approach.

In contrast, alternative assets offering attractive yields such as assets tenanted by RCHEs – particularly private homes in mixed-use developments – have drawn increasing attention from investors.

Such assets have often been overlooked due to their complex due diligence requirements and long-term investment horizon. However, with rising yields and active transactions (four assets worth over $41m transacted in Q1 2025, for example) this sector is beginning to regain momentum.

RCHE operators are considered financially stable tenants: those participating in the EBPS can secure up to 50% of beds through government subsidy contracts, providing a reliable revenue stream.

Since many RCHE occupants are referred by public hospitals or the SWD and primarily rely on government subsidies, revenue growth is largely constrained by public funding levels.

However, due to the difficulty in finding private premises that meet the regulatory requirements for operating RCHEs, rents for suitable spaces tend to be on the higher side.

RCHE facilities are often located in commercial parts of older, mixed-use residential buildings, where compliance with licensing standards for floor loading, fire safety, escape routes and accessibility, for instance, is essential.

As a result, RCHE operators as tenants typically pay higher rents ranging from $3.80–$5.10 (HK$30–$40) per square foot per month – compared with other upper-floor commercial uses such as gyms or restaurants, which currently command a rent of around $2.60–$4.50 (HK$20–$35) per square foot per month.

This premium reflects the limited supply of compliant premises and the specialised nature of RCHE operations generating higher yields (7% to 9%) for the property landlords; currently, other typical retail assets in Hong Kong are transacting at yields ranging from 5% to 7%.

From an RCHE operator standpoint, when comparing the property rents payable to the landlords and the bed income, operators are paying around 32% to 45% of their bed income to the landlords, indicating a healthy cost-to-income ratio for operators.

RCHEs under the EBPS often benefit from higher occupancy and government-backed income, reducing the risk of lease termination and enhancing investment stability.

Investing the assets occupied by RCHEs requires careful consideration to ensure statutory and regulatory compliance, particularly with the Residential Care Homes (Elderly Persons) Ordinance.

To mitigate legal and operational risks, investors should therefore conduct thorough due diligence in the following areas:

• licensing status and renewal history
• building and fire safety compliance
• zoning and land lease conditions
• fit-for-purpose design and accessibility standards
• review of the operator's reputation and compliance.

While government subsidy schemes such as EBPS and RCSVS have laid the foundations, the future of senior living must be shaped by a more integrated and inclusive approach.

Private RCHEs, particularly those participating in government schemes such as the EBPS, offer stable occupancy and predictable revenue streams backed by public funding. However, RCHEs alone cannot meet the full range of senior living needs.

There is a growing demand for private, lifestyle-oriented housing options tailored to independent and healthy seniors, especially those on middle incomes – when it was launched by HKHS in March 2023, Blissful Place received more than 500 applications for just 312 units, reflecting the intense competition and unmet need.

Ideal developments should offer clubhouse facilities, recreational and lifelong learning programmes, and green design that promotes well-being and social engagement.

Unfortunately, private developers have largely stayed away from this sector due to the high land costs and subsequently low profit margins. Without government intervention, the economics of senior housing development remain unattractive.

To address this gap, the government must consider implementing special zoning policies and lowering land premiums specifically for senior housing projects.

If these challenges are not addressed, many seniors may choose to relocate to cities in the Greater Bay Area of mainland China, where housing is more affordable and lifestyle offerings are broader.

This migration could have long-term economic implications for Hong Kong – which has no statutory retirement age – as healthy seniors represent a valuable segment of the labour force and consumer base.

Retaining them through thoughtful housing policy and community planning is essential to sustaining Hong Kong's social and economic vitality.

Sections of this article were adapted from a CBRE insight report published in June.