While a Department of Housing and Urban Development program to convert government-subsidized multifamily apartment units into affordable senior housing is a step in the right direction, the tremendous—and growing—demand for more is driving the need for a scalable model.
States are under tremendous pressure to find cheaper, better ways to work with their highest-cost clients, says Michelle Norris, Senior Vice President of Business Development and Public Policy at Columbus, Ohio-based National Church Residences, especially with the nation’s rapidly expanding healthcare budget and the aging demographics.
On a state level, many governments are looking for the most cost-effective way to care for the oldest, frailest populations, she says, and often it’s departments concerned with healthcare—such as Medicaid—who are initiating conversations with other agencies and organizations. As a substantial amount of this high-cost population can be found in federally-subsidized housing, communication channels are opening between housing and healthcare providers to prevent moves into expensive institutional settings that are heavily Medicaid-funded.
“Policy and budget constraint issues everywhere are driving conversation between state departments, and now they’re talking to developers to enlist their help,” says Norris.
Demand for affordable senior housing is already staggering. As of 2006, for every one person living in a Section 202 housing (Supportive Housing for the Elderly) unit, there were 10 people on a wait list for that unit, according to an AARP Public Policy Institute study.
HUD’s Assisted Living Conversion program, which provides about $30 million a year to eligible projects designated for seniors owned by private, nonprofit entities, “infuses some dollars to address those needs,” says Naren Dhamodharan, president of NDA Consultants, LLC, a Massachusetts-based consulting firm that works with non-profits throughout the country to achieve innovate housing solutions with the help of federal grants.
NDA Consultants works primarily with organizations seeking HUD’s ALC program grants, usually an 18-24 month process from initially putting together and submitting an application to the completion of the grant.
Throughout the country, people are aging in place, and this is true for those residing in federally-subsidized housing as well. Program funding can be used to convert all or some units into assisted living or service-enriched housing. “It blends programs nicely for seniors so they don’t have to move out as they get older, or delays the move,” says Dhamodharan—often at huge cost savings for Medicaid.
While NCR didn’t initially participate in the competitive process to receive HUD grants for the program, the not-for-profit entered the mix when Ohio started offering Medicaid waivers NCR could use in conjunction with the HUD program.
Not every organization receiving the HUD grant is like NCR, which has a “very robust” housing property management side along with a “very large and significant” healthcare team in two separate business units that work together to serve residents, says Norris.
NCR’s first project renovated 32 units for senior housing. With the help of an approximately $3 million grant, the building received overall capital improvements, with renovations for each unit to make them modern and ADA accessible. Common spaces were added, including a dining area, professional kitchen, and community center.
Once the renovation was complete, the organization was able to use a Medicaid waiver in combination with the rental subsidy to pay for services necessary to keep people in their homes rather than a nursing facility.
“These are very high-demand units,” says Norris, who says that her organization’s perpetually-full units can create complications for extensive renovations. If it’s not possible to shift residents from one side of a building to the other when performing renovations or upgrades, organizations must find adequate housing for each resident until the project is complete.
Between 2000, when the program began, and 2012, Dhamodharan’s company has helped facilitate the conversion of about 1,800 units to assisted living or service-enriched housing, he says. HUD awarded grants to 11 organizations in 2012, but the competitive grant process leaves many without funding for their projects.
HUD isn’t trying to be the “complete solution” for the growing affordable senior housing demand, says Norris. Rather, they’re creating pilots that allow conversations to be held across government agencies at state and federal levels with provider organizations and and other funding sources.
For-profit housing providers are not eligible for the program, but the initiative could create innovative funding models that could be marketable on a larger scale, says Norris.
“It’s a way to serve as a catalyst to try to enhance housing in a way that addresses some of the needs without having folks go straight to high-cost institutional settings,” she says. “We’re now trying to figure out a way to make this scalable. We’re in conversations with state agencies to talk about ways to take this to the market using a bond program [such as social impact bonds] or other innovative financing models.
“If that happens, it’s no longer necessary to use HUD, and no longer necessary to only be a nonprofit housing provider.”
The beauty of this program, says Dhamodharan, is that subsidized housing works.
“People are paying ‘x’ percent of their income for rent, and then they have some funds available to support the service expenses. Because of the nature of the tenant, they’re naturally in line with third-party funding streams like Medicare and Medicaid,” he says. “There’s a lot of opportunity, I believe, that even for-profit companies have in creating these kinds of affordable models, because not everyone can afford [traditional senior housing].”
With more organizations involved, more units could get funding to become service-enriched. NCR is currently in talks with various entities from the philanthropy side to state Medicaid programs and the Ohio Housing Finance Authority. “We’re working on figuring out a model to propose to the state for something that’s similar to what HUD did, but without needing HUD to provide the capital,” Norris says, adding that there’s a “strong possibility” something could be developed in 2013.
Written by Alyssa Gerace