February 28, 2002

Market grows for affordable assisted living

  • Developers can play a big role in housing low-income seniors
    Washington State Coming Home Program

    Changing demographic trends and advances in medicine are creating a housing crisis for the frail elderly.


    Americans are increasingly mobile and medical advances have improved our life expectancy. These two trends have resulted in more people living into their advanced years, but without the nearby family system that once provided both medical and social supports.

    As a person ages in this country, options for housing, health and personal care services become more and more limited.

    The housing industry has responded to this crisis by building assisted-living facilities, but development has been almost exclusively targeted at market-rate consumers. Assisted living was created as a progressive alternative to the nursing home placement. It provides housing with services for the elderly, with consumer preference and independence at its philosophical core.

    Assisted living offers private apartments, meals, assistance with personal care and medication assistance, limited supervision and nursing services.

    The following is a discussion of how real estate developers can play a key role in addressing this issue for low-income older Americans.

    Market rate vs. affordable

    Market-rate assisted living, accessible to seniors with incomes of over $25,000 per year, has cropped up across the country. On average, the more than 30,000 assisted-living residences nationwide charge over $100 a night for their services, pricing them out of reach for the majority of older Americans.

    There is a severe shortage of affordable assisted living for low- and moderate-income individuals, especially in rural areas. And without affordable assisted living, seniors may move into skilled nursing facilities before they require service assistance.

    The Robert Wood Johnson Foundation (RWJ) has set out to address this senior housing crisis through a new program called Coming Home.

    In February 2001, the Washington State Department of Social and Health Services, Aging and Adult Services Administration, was chosen as one of nine states to receive the Coming Home grant. The program is administered by NCB Development Corp. (the nonprofit development arm of National Cooperative Bank) and it encourages grantees to create new and innovative models of affordable assisted living.


    The creation of affordable assisted living is a balancing act that requires the cooperation of two essential pieces: housing and services. Payment for housing is made possible by Supplemental Security Income (SSI), a federal cash assistance program that makes monthly payments to people who are age 65 or older, blind, or disabled and with limited income and resources.

    The first challenge in creating affordable assisted living is to bring housing costs below a tenant’s monthly income, so that their rent is covered without exceeding their modest income.

    The second challenge is to keep the operational costs of service delivery within the range of Medicaid reimbursements. This poses a particular obstacle in rural areas, where sparse population density requires the development of smaller facilities. With fewer units, a facility cannot achieve economies of scale. Lack of trained staff in rural areas also contributes to the problem. In urban areas, the high cost of land and labor are the most significant hurdles to cross.

    The development process is an intricate one, involving the assembly of the lowest cost capital and debt combined with design and construction cost savings. Without cost savings in all four of these areas, it is difficult to create high quality assisted living that can be paid for at Medicaid and SSI reimbursement rates.

    What are the solutions?

    Low cost capital comes in several forms: government grants or foundation grants, charitable contributions, sponsor equity, tax credits, and soft secondary debt. Most often, it is acquired through a government agency or charitable foundation. The Department of Housing and Urban Development, the Department of Agriculture, state and local governments, national or local foundations, and other organizations are all good places to look for below market-rate debt.

    Design savings are available in two areas: long-term operational efficiency (including staffing, programming and maintenance/utility costs) and construction cost savings (including costs of materials and costs of construction labor and overhead). A development team member experienced in both design and operations is essential to achieve savings in these areas.

    Construction savings can be realized through detailed study of the building design, materials and systems specifications, site work, construction means and schedule. There must be a careful balance between short- and long-term costs during construction cost analysis.

    The Coming Home Program

    The RWJ Foundation concluded that major barriers to bringing affordable assisted living to rural communities have been the lack of technical assistance and availability of capital for development. The Coming Home Program seeks to rectify this situation by providing technical assistance and grants to states that are committed to serving their low-income seniors.

    By funding state programs, the Coming Home Program has enabled each grantee to work on problems specific to their state. Coming Home project directors work to make the regulatory changes needed to foster the creation of assisted living for low-income, frail seniors. Development of actual facilities is an integral component of the program, as the development process highlights areas where regulatory change is needed. An added benefit of the program is providing access to pre-development capital (up to $100,000 per project) to chosen sponsors.

    For those interested in developing affordable assisted living, the Coming Home Program maintains a Web site, Resources found here include an introduction to the concept of assisted living, case studies of completed Coming Home projects, summaries of state regulations, and links to helpful resources.

    George Zimmerman is the program director for the Washington State Coming Home Program. He can be reached at (360) 725-2534 or

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