Housing and Services Alternatives for Seniors - Making the Right Choice
Terry W. McKinley

The 1990s have seen an explosion of alternatives in facilities providing housing and services for older people. Until then, alternatives were primarily composed of care facilities-nursing homes and intermediate care facilities-subsidized apartments, and a few apartment buildings. Many older people, faced with increasing demands of maintaining a single-family home, faced the difficult task of staying in a home no longer suited to their needs, or moving into a nursing home-an unpleasant and expensive choice.

Beginning in the late 1990s, health care providers began to experience a new level of demand in the form of healthier seniors wanting housing that was more compatible with their needs. This phenomenon was noted by gerontologist Glaser in 1981 testimony before the President's Commission on Housing:

"Americans seem to have received a new birthright: longer life. It comes to us simultaneously as a gift, privilege, problem and opportunity. The critical question is now 'what to do with longer life?'....Americans are growing older and living longer in record number. What was a small minority has now become a growing, influential consumer, lobby and political force. And frankly, we are staring down a demographic cannon as we can now see the 'baby boom' of this century becoming the 'senior boom' of the next century (Glaser 1981, p. 2)."
In response, several new types of facilities have been created, offering different housing and services and paid for in different ways. In the Minneapolis/St. Paul metropolitan area, with an estimated 2,000,000 population, there are 450 senior facilities, comprising 36,236 units; the senior population in that area is nearly 262,000. It is clear that many more alternatives will be needed, and the variety of services will surely become even more complex (Anderson, 1998).

For the consumer and his or her family, these alternatives can be confusing, especially if decisions are being made in an atmosphere of urgency rising out of family trauma or death. Says Mary Ayoule, director of housing services at the Minnesota health and Housing Alliance, "It's best to check into your options before a crisis, so that you or your family are not forced into a quick decision." It is especially important to plan ahead, since growing demand has filled many facilities, and waiting lists are common (as cited in Anderson, 1998).

A thoughtful approach to reviewing the specific advantages and disadvantages of these alternatives can make this important transition much easier and, in the end, far more rewarding. Where possible, location of a facility should be considered so as not to disrupt life patterns-proximity to church, friends, a favorite restaurant. Many alternatives offer services that permit a husband and wife to continue to live together, even if one needs significant health care. Simplicity of participation-meaning affordability and understandable legal arrangements-- makes everyone more comfortable. Age compatibility with other residents makes "feeling at home" much easier. After location, the most important factors are financial circumstances, desirability of housekeeping services and meals, and the need for health care.

The following discussion identifies pertinent aspects of the four principal types of senior facilities:

Independent living facilities (ILFs): rental, condominium, and cooperative
Assisted living facilities (ALFs)
Continuing care retirement communities (CCRCs)
Long term care facilities ("LTCs")
Independent Living Facilities (ILFs)

As their name implies, independent living facilities are designed for active seniors. Housing is provided in a variety of settings, including efficiencies, one-, two-, and three-bedroom apartments, townhomes, and even mobile home parks designed especially for seniors. In most ILFs, extensive community facilities are provided for socializing, including community rooms, workshops, libraries, crafts rooms, and central kitchens for resident use.

Services vary and usually include transportation and social programming. Travel arrangements may be available, as well. Housekeeping, including laundry, is often available for an additional charge. Larger ILFs may provide meals, although it is common to find that only one meal a day is served, with most residents continuing to cook at home or eat out. Health and personal care can be purchased from home health care providers, paid for on an hourly basis. Such providers may or may not be co-located within the facility.

ILFs are organized as rental, condominiums, and cooperatives, and are often managed by health care organizations. For these organizations, ILFs represent the entry point into their continuum of care, through which many seniors advance as their needs for health care and services increase with age.

Rental buildings are often owned by nonprofit health care providers or profit-motivated investors. The level of quality and service can vary significantly, depending on the type of owner. Rental buildings are constructed by these organizations using mortgage financing, the cost of which is passed on to the residents-along with operating expenses-in the form of monthly rents, which can range from $800 to $1,500. Rentals include commercial real estate taxes. These rentals typically include very limited service, and the specific services provided should be carefully noted.

Rental buildings are often seen by seniors as offering the most flexibility; one can simply leave at the end of the lease term, and one is not paying for services they don't use. On the other hand, interest paid to the owner in the form of rent is not deductible, and the tenant has little input on decisions affecting rental rates, operations and cost of running the building.

Condominiums are typically developed by for-profit real estate developers and are often managed by health care providers. Once again, quality and service can vary. Condominium units in the Twin Cities range from $50,000 to $300,000 in buildings specifically designed for seniors. In the condominium, the resident holds a deed to the specific home they occupy and pays monthly association fees for maintenance of the building. Usually, responsibility for maintenance within the home itself is the responsibility of the individual owner. Monthly maintenance fees range from $50 to over $500, with the owner paying their own real estate and debt service. The unit owner may purchase their unit with cash or with a loan. In the latter case the purchaser must pay debt service on the loan, as well as their own real estate taxes Mortgage interest and real estate taxes are deductible from federal and state income taxes. In some states these "owner-occupied" units may pay reduced real estate taxes and are often referred to as having been "homesteaded." This can result in a significant savings over rental facilities. In addition, assuming a strong real estate market, the owner's equity is maintained or appreciates, and is returned to the owner or his/her heirs on sale of the home.

Condominiums offer the resident more control over the building and, as mentioned, more favorable tax treatment than rentals. Ownership does come at the expense of a more serious commitment to the building, and one's home must be sold upon death or moving.

Cooperatives are developed by for-profit developers and nonprofit health care providers. In a cooperative, a resident owns a share of stock in the corporation that owns the building. Typical homes range from $50,000 to $150,000, with monthly charges, including real estate taxes, from $300 to $1,000 and higher in luxury buildings. Most cooperatives use a "blanket mortgage" to provide the underlying financing for the building and to reduce the down payment or entrance fee required of purchasers. Debt service on that loan is pro-rated to the owner and, along with real estate taxes, is deductible from federal and state income tax. Cooperatives typically qualify for the same homestead real estate tax savings as condominiums, and like the condominium, equity is returned to the owner/heirs on sale of the home.

Residents and nonprofit sponsors of cooperatives are quite vocal in their preference for cooperative living, arguing that the cooperative creates a more supportive environment. Again quoting gerontologist Glaser's testimony:

"From a gerontological point of view, the essential benefit of the cooperative is that it provides an economic structure and social framework that fosters self reliance, self control and determination, interdependence and cooperation among the resident members, even among those with severe chronic conditions. As gerontologists we know that these factors contribute directly to continued independent living, successful aging and the enhancement of longer life (Glaser, 1981, p.5).... It is possible that some of those critical social forces could emerge in a condominium approach, though we are not so sure. Likened to an ocean voyage, in a condominium each of us ties our individual boats together and sets sail. By contrast, with the cooperative, each of us sets sail on the same ship for better or worse. In short, in the cooperative "we are all in it together (Glaser, 1981, p.6)."
The typical resident of an independent living is still quite active and wants little help with daily activities. He or she may still travel extensively, and even own another residence in a warmer-or colder-climate. Very often, such individuals could still live in a single-family home and are making the move primarily to simplify their lives.

Assisted Living Facilities (ALFs)

ALFs are rental buildings, designed for the individual who wants more services than are available in independent living facility. ALFs are often referred to as "need driven," in that prospective residents are often moving in response to illness or trauma.

The development of such facilities is new in the field of senior care, and many variations exist. Prices and services should be compared carefully, as some facilities offer "bundled" services-numerous services under one basic charge-and some offer "ala carte" services, paid for as options and in addition to the basic monthly charges. Care should be taken to determine what specific types of services will be required. The American Association of Homes and Services for the Aging ("AAHSA") notes that the following services are usually provided by ALFs:

Assistance with daily living activities such as bathing
Help with medications
(AAHSA, 1998)
Apartment homes in ALFs are typically smaller than in ILFs, and include very small kitchens or no kitchens at all. Three meals are usually offered daily in a central dining room.

Assisted living facilities go by a variety of names:

Residential care facilities
Personal care facilities
Personal care boarding homes
Sheltered care facilities
Adult residential care homes
Boarding homes
 Basic care facilities
Enriched housing
Comprehensive personal care homes
Adult foster homes
Supported residential care facilities
(Stuart, 1997, p. 16)

Assisted living facilities are an excellent alternative for seniors who want to maintain some independence, keep open their housing options for the future, and who want to be relieved of some daily chores. Since they can serve such a wide variety of needs, they are becoming increasingly popular.

With this rapidly growing demand, many real estate developers have "jumped on the bandwagon," with varying levels of expertise and financial strength. In a few cases, companies specializing in assisted living have even become the latest Wall Street "darlings." As with any new concept, caution should be exercised to be assured that facility owners have done their homework, have adequate staff to provide promised services, and have adequate financial strength. And, it is rarely a mistake to err on the side of choosing an experienced provider.

Continuing Care Retirement Communities (CCRCs)

CCRCs, previously referred to as life care centers, are facilities which, in addition to offering a full continuum of housing and service options, allow residents to insure against future health care needs through large lump-sum payments, called "entrance" or "endowment" fees upon entering the facility. These payments and an agreement signed at time of occupancy, constitute an insurance policy, with the CCRC agreeing to provide agreed-upon care, when needed, without additional payment (Stuart, 1997).

CCRCs typically provide many levels of housing, beginning with independent living, often in townhouses or apartment units, and may include cooperative or condominium ownership. Housekeeping, meals, and health care are available, as needed. When a resident becomes older and needs a higher level of care, he/she can move to another home, usually on the same campus, which is staffed .to provide assisted living services; one facility calls this "Helpful Living." If chronic illness occurs, a long term care facility is also available with full nursing care, often with a spouse remaining in the independent or assisted living facility.

Some of the advantages of CCRCs, noted by AASHA, are:

Physical and financial security
Independence and access to health care
Companionship of friends and neighbors of similar age
Access to community facilities
(AASHA, 1998)
AASHA lists the following services as typical in CCRCs:
Nursing and other health-care services
Meals and special diets
Scheduled transportation
Emergency help
Personal assistance
Assisted living
Recreational and educational activities
(AASHA, 1998)
What clearly separates CCRCs from all other forms of senior housing is the fact that housing and services are furnished under a contract for services signed at the time of occupancy. A new resident usually has the option of contracting for different levels of service, if you will, agreeing to a certain set of "bulk" services delivered under the pre-paid arrangement, with additional services furnished on an ala carte, or pay-as-you-go basis. It is possible, for example, to make a high enough pre-payment that, together thereafter with fixed monthly charges, all future health care needs are covered, even if they involve catastrophic illness or injury and expensive, long-term medical expenses.

The risk of insuring that the entrance fees and future revenues will be sufficient to cover these unforeseen medical expenses falls to the owner of the facility. Much research has been done by CCRCs, working with highly sophisticated actuarial models, to budget for future years. Many CCRCs have failed because they failed to properly anticipate health care costs. This, then, must also be a concern for a prospective resident, for as noted by Stuart, "...the most obvious disadvantage to paying an entrance fee is the risk of losing it if the community shuts down (Stuart, 1997, p. 25)."

To partially illustrate the complexity of predicting longevity and future medical needs, the following is an excerpt from "Methods For the Analysis of CCRC Data," written by Jones for the North American Actuarial Journal:

"To calculate actuarial present values, the actuary should be able to estimate the probability that a resident is in any given state at any future time as well as the probability that a resident will move between any two states during any time interval (Jones, 1998, p.40).
The Institute of Actuaries in the United Kingdom, has been studying CCRCs as a relatively new phenomenon in Great Britain. They note that, after paying the entrance fee, "...the ongoing annual charge...is not dependent on the state of the member's health. Hence, moving to residential or nursing care does not run the risk of erosion of capital, or relatives having to pay large fees." However, they also say that "...they carry substantial risks, including insolvency, possibly damaging public acceptance of the whole concept" (Taylor, 1998).

Indeed, after the failure of numerous life care centers in the 1970s and 80s, consumer columnist Jane Bryant Quinn published an article titled "Life-Care Centers Could Prove Risky to Your Old Age Security". In it she commented, "...if the life-care center is not well run and goes bankrupt-as many have-you risk losing all your money and having no where to live." Even facilities sponsored by major church denominations, ordinarily regarded by seniors as the most secure types of facilities, were not immune. According to Quinn,

"The Methodist church-sponsored Pacific Homes, a California-based chain...failed in 1977 after more than 25 years of practicing what the trustees-in-bankruptcy called "a fraud on unsuspecting elderly people (Quinn, 1984)."
Clearly, great care must be taken in selecting a CCRC with proven track-record and demonstrable financial stability.

Long Term Care Facilities (LTCFs)

LTCFs are typically not an option of choice for the average senior looking for a new housing option. A prospective LTCF resident is more likely to be referred by a physician and need the extensive services available there. At one time, LTCFs were the only option for older individuals, and many seniors moved there before their intensive services were really required. Today, LTCFs are utilized primarily by seniors needing an extended stay with intensive support. With the increase in Alzheimer's disease, many LTCFs have constructed special facilities for these individuals.

Occupancy rates vary from state to state, from $55.00 to $150.00 and higher in more elaborate facilities. Medical expenses are paid for, in addition, except where contracted under a CCRC agreement. Nursing care is often reimbursable by Medicare and, if one's income is low enough, Medicaid. Reimbursement rates vary from state to state.


Many factors contribute to the decision of what type of facility is best. Financial resources are always a consideration, and a lawyer or accountant should be consulted. After narrowing options based on one's financial ability, it is useful to talk with a friend, relative, doctor, pastor, or social worker (Stuart, 1997).

Most important, care should be taken to study the financial condition of the facility. Stuart encourages prospective residents to study a facility's financial statement, operating budget, credit references, and information about liens and lawsuits. He adds, "...if the facility refuses to authorize the release of credit information, you should wonder why" (Stuart, 1997, pp. 76, 79). Quinn even suggests asking about how entrance fees will be spent: Will they be used for construction; will reserves be adequately funded, etc? If after asking these questions you are still uncomfortable, it's probably a good idea to look further.

The choices made in later stages of life should be made with a great deal of care, because moving again becomes even more difficult as one ages. For many, this move will be the last in their lives. It need not be rushed. There are many resources available to the persistent senior, and they should be studied carefully.

Works Cited

American Association of Homes and Services for the Aging ("AAHSA"), Understanding Senior Housing Options. Online. www.aahsa.org. 20 August 1998

 Anderson, Kathy P. "A Place to Call Home - Senior Housing Options for All Lifestyles". Senior Times. August-November 1998: 10-12.

Glaser, Gerry. "Housing Cooperatives for the Elderly", Presentation to the President's Commission on Housing. Washington, D.C. December, 1981

 Jones, Bruce L. "Methods for the Analysis of CCRC Data" North American Actuarial Journal. www.soa.org/library/jones.pdf. 14 September 1998.

Quinn, Jane Bryant. "Life-Care Centers Could Prove Risky to Your Old-Age Security." Washington Business 14 Mar. 1984: 6.

Stuart, Lettice. Making the Move - A Practical Guide to Senior Residential Communities. New York: Avon Books. 1997

 Taylor, Iain. "Actuaries Welcome the Development of Continuing Care Retirement Communities in the UK but warn of the Risks Involved". Online: www.actuaries.org.uk/pr-rels/1998/ccrcs.htm. 15 August 1998

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