Affordable Assisted Living: Innovative Funding for Aging in Place

4 min read

The housing industry is well acquainted with the impact of the Baby Boomer generation reaching the age of retirement, the impending need for affordable housing to support this population, and eligibility for Medicaid and Medicare. However, the marriage of assisted living with Low-Income Housing Tax Credit (LIHTC) senior properties is relatively new and is a significant opportunity for those who can reconcile the two programs.

Assisted living is a home model in which residents manage their own apartments and receive assistance as needed. The assisted living business is dominated by the private pay industry. According to the Assisted Living Federation of America, the average cost for a private one-bedroom apartment in an assisted living community is $3,022. The majority of low-income seniors cannot afford private pay assisted living, so they have no alternative other than to enter a skilled nursing facility, which by contrast, follows a medical model in which healthcare professionals are on staff and provide constant care and assistance.

What’s more, the transition for a primarily independent senior from a home to a skilled nursing facility is overwhelmingly difficult, and evidence suggests that seniors in this situation deteriorate faster than those who transition from assisted living.

Historically, the challenge has been to find a common ground between the all-too-expensive assisted living model and skilled nursing, and the Medicaid Waiver program makes the whole concept possible.

The Medicaid Waiver program, established in 1981, is a state-administered offshoot of the Medicaid program, where states can apply for waivers to provide long-term services in home or community-based settings, waiving the requirement that a person be admitted to an institution to receive services. Like the Medicaid program, each state administers their implementation and management of Medicaid Waivers and in some states, Medicaid Waivers pay for assisted living services in home or community settings allowing seniors to receive the assistance necessary for daily living.

But what happens when a low-income senior is residing in a LIHTC property? By separating the services from housing, a multifamily developer can build a senior LIHTC project and use Medicaid Waivers to bring in providers to help with typical senior-related services and to allow residents to age in place.

Medicaid Waivers is an emerging program and can vary dramatically from state to state based on each state’s Medicaid structure. It also depends on the state allocation agency to structure tax credit award criteria that enables these projects to receive tax credits. Here are examples of Medicaid Waiver programs from various states:

  • Illinois – The Supportive Living Facilities (SLF) program, implemented in 2001, was developed as an alternative to nursing home care for low-income older persons and persons with disabilities under Medicaid. Under the program, the resident is responsible for paying the cost of room and board at the facility and the Waiver can be used to pay for services not routinely covered by Medicaid. There are currently 13 assisted living properties with SLF waivers included in Illinois Housing Development Authority’s (IHDA) total multifamily production.
  • Indiana – Indiana’s Division of Aging has two Medicaid Waivers: the Aged and Disabled Waiver (A&D) and the Traumatic Brain Injury Waiver (TBI). Indiana includes assisted living services as a Medicaid Home and Community Based Service (HCBS) benefit under its Aged and Disabled Waiver (A&D Waiver). Assisted Living services are reimbursable under the A&D Waiver when provided to eligible waiver participants residing in qualified residential care facilities.
  • Iowa – The Iowa Finance Authority (IFA) provides rent subsidy vouchers for residents using the Home and Community Based Services Medicaid voucher and has a number of affordable assisted living projects that operate under the tax credit program. The first project under the IFA program opened in September 2003. A recent count of the properties developed with this program yielded 22 around the state.
  • New York – New York offers Medicaid reimbursement for assisted living services under its Assisted Living Program (ALP). The ALP allows individuals who meet financial and other eligibility criteria to have their assisted living paid by either Medicaid (private long term care insurance / private pay) for the aide and other health care services or Supplemental Security Income (SSI) Congregate Care Level III (or private pay) for room and board. Only licensed ALP providers accept Medicaid and SSI to pay for the services and room and board, which distinguishes ALP providers from other Assisted Living Residences (ALR) or Facilities (ALF) which only accept private payment for residential services.

This is a summary of a draft white paper for the National Council of Housing Market Analysts, a Council within NH&RA. The white paper is authored by Mary Ellen Shay, Julia LaVigne, Al Forsythe, and Jennifer Atkinson. The paper should be published and available later in 2015.

Jennifer is a principal with Mitchell Market Analysts, a regional multifamily housing analysis company based in Indianapolis, Indiana, and she is a certified member of NCHMA. Prior to joining the real estate analysis industry in 2006, Jennifer was a software technical writer, manager, and trainer based in Santa Clara, California. She has a degree in computer science and a degree in communication from Purdue University. Jennifer worked on the market study for the first tax credit assisted living project in the state of Indiana. She also has a passion for homeless programs and volunteers with Family Promise, an interfaith homeless support program.