Hospitals As Homebuilders

6 min read

Medical institutions support urban development to improve health outcomes

This September, a new building opened in Minneapolis that, while unspectacular, represents a prototype for the future of urban American development. A permanent supportive housing complex for military veterans—many of them homeless—went up just outside city boundaries, near the Minneapolis VA Health Care System. The 100-unit Veterans East project was seen as yet another advance in the “housing first” strategy, in which the chronically homeless are housed to avoid the cost run-ups of having them live outdoors.

But that is not what was notable about Veterans East. Rather, the $14.3 million project had several financiers, and the leading private one was UnitedHealth Group. The $160 billion company, which is based in nearby Minnetonka and has multiple facilities metro-wide, provided $5.2 million in equity.

This is one of many housing projects the health giant has financed, not just throughout Minneapolis but nationwide. Since 2011, reads the company’s website, “UnitedHealth Group has provided more than $350 million in financing for 56 affordable housing communities in 14 states, helping create more than 1,300 homes for individuals and families. This includes investing nearly $62 million…to build ten new affordable-housing communities and 500 affordable homes in Minnesota and the Great Lakes region.”

UnitedHealth Group joins a larger trend in which major medical institutions delve into urban development—namely affordable housing—as part of a more comprehensive approach to healthcare. These institutions build, operate, invest in or subsidize new or remodeled housing, often in the low-income communities near their hospitals. Sometimes they take a for-profit approach, and other times a philanthropic one, providing zero-interest loans or grants.

These systems have prescribed to a growing belief that better health will surface not just from technology and medicine, but from building nicer neighborhoods. As I noted in a September piece for Tax Credit Advisor called “What is a healthy neighborhood?,” the health outcomes of different demographics appears directly tied to their zip codes. Particularly within an urban context, wealthy areas have abundant jobs, nice public spaces, low crime and healthy food options; poor ones typically have minimal economic development, dangerous streets and public spaces, and retail options that reinforce bad habits. This helps explain, according to some analysts, why life expectancies in these different neighborhoods are often decades apart.

Thus major health systems, seeing the benefits of dense housing and economic development, have used their vast resources to encourage it in areas suffering from growth shortages. The strategy, says Vickie Eaton Johnson, director of community relations at the Cleveland Clinic, is considered an “upstream” way to provide preventative care, helping people meet their material and health needs, so that they have money to maintain health and well-being.

“It’s within our own self-interest to partner with the community outside the hospital,” she said. “We want people to be well longer, not to show up at the emergency room.”

Besides UnitedHealth Group, here are some other notable medical centers pursuing the same strategy:

Bon Secours Hospital
The Catholic nonprofit, based in a rough area of west Baltimore, was an early pioneer in the community-based health approach, said Dr. Megan Sandel, a nationally-recognized healthcare expert for the Boston Medical Center. Bon Secours’ approach is multi-pronged, dealing in neighborhood revitalization, social services, youth employment programs, workforce development, and last but not least, housing construction. The hospital has a housing division that focuses on developing the west side, specifically. The agency has “developed and now owns and operates more than 720 apartment units for low- and moderate-income seniors, families and people with disabilities.”

Boston Medical Center
Rather than building and managing homes, Boston Medical Center is, in the mold of UnitedHealth Group, committed to investing in them. In 2015, several prominent Boston nonprofits joined to form the Healthy Neighborhoods Equity Fund. The fund seeks out institutional investors who will underwrite high-density, mixed-use projects in various low-income neighborhoods or municipalities throughout greater Boston. BMC, a nonprofit hospital located on the South End, has added $500,000 to the fund. BMC’s role is as a Class A investor that gets market-rate returns, but Dr. Sandel said by phone that “any of the returns that we get, including the principal, we will reinvest in more housing projects in the future.” BMC is also providing a zero-interest loan to a food market that will be opening at ground-level in one of HNEF’s projects.

Cleveland Clinic
The Cleveland Clinic neither builds nor invests in housing, but helps specific individuals buy or rent, in some cases by remodeling the city’s older historic stock. The clinic, a world-renowned nonprofit that is Ohio’s second-largest employer, has a diverse range of workers, including, said Johnson, many residents from the poor surrounding neighborhoods of east Cleveland. So a decade ago, the clinic started a housing program that incentivizes its employees to live in, and revive, the surrounding area. Employees who locate within about a mile of the clinic in any direction qualify for $20,000 in down-payment assistance if they buy a home, and $1,400 if they rent. All of this money comes from a philanthropic trust the clinic has set up for the program, and so far this year, the fund has divvied out $2 million.

Johnson says that this has helped spur private construction in the surrounding area, and is part of a broader community development mission that has also included building parks and hosting farmer’s markets.

Of course, these are not the only medical institutions taking a community-based approach. The concept has proliferated so much that there is now a network of 40 health systems, called the Healthcare Anchor Network, that are dedicated to advancing the concept. These include other prominent systems, like Dignity Health and Kaiser Permanente, and the network often partners with institutional private investors and major philanthropies, like the Kresge Foundation and the Robert Wood Johnson Foundation. It is not hard to see, given the vast resources circulating through these institutions, how their focus on urban development could lead to major transformation in America’s cities. Maybe, too, this pro-housing, pro-growth mentality will help close the nation’s health gap.

Story Contacts:
Dr. Megan Sandel
Associate Director of the GROW Clinic, Boston Medical Center

Vickie Eaton Johnson
Senior Director of Community Relations, Cleveland Clinic

Katrina Healy, communications manager,

Mary Tingerthal
Commissioner, Minnesota Housing, 651-296-5738