Changes Coming to HUD Financing Guidelines for CCRCs?

There may be a big change around the corner for continuing care retirement communities and other care continuum campuses seeking financing from the Department of Housing and Urban Development (HUD) regarding the agency’s guidelines for providing loans to communities where more than 25% of their units are unlicensed. 

Traditionally, HUD financing has a limitation on the percentage of unlicensed units that could be allowed for senior living communities seeking to utilize its LEAN program, generally set at about 25% with the ability to grant waivers of up to about 30%. 

In early June, during the annual Committee on Healthcare Financing, HUD representatives gave a couple presentations on the agency’s Section 232 program. One of those presentations caught HUD/FHA lender Lancaster Pollard’s eye, including two slides in particular that discussed the historical and proposed treatment for independent living or unlicensed units.


“They said in their presentation that the limitation of 25% is not statute, it’s not legally required; [rather,] it’s programmatic,” says Nick Gesue, senior vice president and director at Lancaster Pollard Mortgage Company. “They feel they can go well above that 25% so long as the property is providing care for what’s defined as ‘frail elderly,’ which is law—but that percentage is not.” 

Basically, HUD still requires that some level of a facility or community be licensed, but the unlicensed units, perhaps now in greater percentages, can be acceptable so long as they’re providing care to frail elderly, which Gesue says is loosely defined in HUD statutes as people aged 62 or older who need assistance with at least three activities of daily living (ADLs). These ADLs could range anywhere from needing help with money management, light housework, and meal preparation, to bathing, dressing, and toileting.

“This seems to open up facilities—including independent or assisted living freestanding buildings [in addition to CCRCs]—where it’s pretty common that part of it is licensed, and the other part is not,” says Gesue. “Historically, they wouldn’t qualify for HUD financing because of the 25% standard, but now, as long as they’re providing those services [to the frail elderly], those facilities would now be eligible.” 


CCRCs have traditionally been “completely ineligible” as a campus, he continues, and if CCRC providers wanted to use HUD, they’d have to separate their skilled nursing and assisted living components from the independent living component.

“I think you’re going to see more of these communities out there that have assisted living and independent living, and even with skilled nursing attached to it,” says Erik Lindenauer, president of Chevy Chase, Md.-based lender Housing & Healthcare Finance. “They need financing for the whole community, and it seems to be a model that makes sense moving forward.” 

Updating guidance for CCRC-financing is especially relevant regarding the aging in place movement, says Lindenauer, as many seniors prefer the ability to remain in one community even as their healthcare needs escalate. 

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“HUD’s realizing that the program is viable and that the guidelines previously set were excluding a lot of very good projects,” he says.

“What this change that HUD is talking about would effectively allow someone to do is finance an entire CCRC,” says Gesue. “The only caveat to that is, HUD still has a prohibition from collecting entry fees, so this is a limited subset of the entire CCRC properties out there. It would have to be a pure rental CCRC.” (Lindenauer also noted that it’s unlikely the program will extend to CCRCs with an a la carte model of services or tiered pricing.)

HUD said during the Committee on Healthcare Financing event that it was working on written guidance that would be issued either in a mortgagee letter or as a notice, says Gesue, who expects this will be issued “sometime soon.” 

In the meantime, the agency has indicated willingness to continue to accept applications for communities whose unlicensed component may comprise more than 25% of its overall units, but they’ll have to request that as a waiver until the guidance has been handed down. 

Lancaster Pollard has already gotten a few nibbles of interest from both existing clients and potential ones that may take advantage of new guidelines, says Gesue. But because this new development is very recent, the financing firm is currently only able to put together some proposals modeling what using HUD financing would look like for communities that historically couldn’t have qualified. 

As of press time, HUD had not given SHN a comment regarding details of, or a possible timeline for, updated guidance.

Written by Alyssa Gerace

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