Senior Living Faces Danger in Lack of Resident Background Checks

Senior living operators are behind the curve on several important standard procedures that have long been deemed the norm in the housing industry, experts say. The growing senior housing space, which many say is still in its infancy relative to other property types, has a lot left to learn from other housing players, including the importance of conducting resident background checks.

While the American Seniors Housing Association recently published a Special Issue Brief on ensuring compliance with criminal background checks with regard to employees, very little is being done currently to screen residents for prior arrests, prison time and even credit history.

But welcoming residents with spotted pasts can have serious consequences for senior living operators, experts say. Doing so can result in costly lawsuits, an unsafe environment that endangers fellow residents, and, when dealing with a resident who has poor credit history, a loss of monthly rent payments. Ultimately, it can damage the value of the community and the property.

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In mid-June, the California League-Fresno Village experienced first-hand what can happen if residents with criminal history are admitted into their communities.

Resident Robert Short was on supervised release after a conviction for selling methamphetamine, a Schedule II controlled substance, when he was arrested for allegedly operating a small-scale meth lab in his California League-Fresno Village apartment.

“It’s an unfortunate thing that we just don’t screen in this business,” said Doug Fullaway, vice president of senior living business development at RealPage, Inc., which provides property management software for senior housing and other housing types. “You can spend less than $25 to screen a prospect and it may save you thousands of dollars.”

Fullaway presented an example to illustrate this point at RealPage’s 2014 RealWorld User Conference Monday. He said three 87-year-old women had moved into an assisted living community in North Carolina and had conversations that seemed suspicious to the kitchen and dining room wait staff. After investigating the staff members’ concerns, the executive director discovered the women had been arrested previously for selling the prescription drug Oxycodone.

However, because no resident screening was conducted at the facility, and based on move-in agreements and the residents’ Medicaid funding, the operator could not evict them.

“What’s it going to cost when you have one of these incidents? You really need to start thinking about this,” Fullaway advised operators. “I know of two large REITs [real estate investment trusts] who want to know what you’re doing about this — they expect it. They think it’s a cheap expenditure to protect yourself.”

Currently, Texas is the only state that requires operators of assisted living and residential care to conduct resident screenings, focusing specifically on screenings for sexual predators, Fullaway said. Three other states are looking into requiring similar background checks, according to conversations Fullaway has had with state officials and association members.

Several years ago, the Department of Housing and Urban Development (HUD) issued a final rule on screening and eviction for drug abuse and other criminal activity, which applied to many housing types, including a segment of the senior housing industry: the Supportive Housing for the Elderly Program, which provides supportive services and rental assistance for low- or moderate-income elderly, including elderly with disabilities.

HUD’s Quality Housing and Work Responsibility Act, among other statutes, provided authority for better screening and denial of federally assisted housing to individuals and families with specific types of criminal activities in their history. In effect, it required operators to implement policies for screening out resident applicants who had prior criminal arrests and convictions.

While HUD’s guidance applies to federally assisted housing, the vast majority of senior housing operators have yet to implement any sort of background check process to ensure the safety of their residents and their business.

These operators who neglect to screen residents are often afraid of losing business to competitors, experts say.

“In the past, it was a competitive issue — no one else was doing it,” said Anne Kempsell, the national director of partner services of SeniorLiving.net. “If doing a resident screening is going to keep someone from moving in, then we’re not going to do it.”

However, the industry’s mindset will begin to change as operators understand more of the benefits of conducting a resident screening.

Criminal screenings protect existing residents from potential safety threats, and help operators avoid costs that may arise from lawsuits associated with evicting a resident, for example.

Additionally, conducting credit checks as part of resident screenings can be advantageous for operators, as they can show whether or not a prospect can afford a unit in the community. Credit score and income-to-debt ratio can be used to upsell a unit or recommend a less expensive unit based on the applicant’s credit history.

“The realization is coming slowly that it’s a necessity,” Kempsell said.

Though resident screenings may provide benefits for senior housing communities, they won’t be implemented as a standard operating procedure for some time to come, Fullaway said.

“There’s reluctance because nobody has a long history of doing this,” he said. “What we’re seeing in the state of the industry is that we’re all new at this — but maybe we shouldn’t be. Maybe we should be sticking our toe in the water and figuring it out.”

Written by Emily Study

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