A Breakthrough in Creating Affordable Assisted Living

In 2001, a statewide study by the Iowa Finance Authority indicated that more than 50% of the elderly aged 75 years and older could not afford what was currently available on the assisted living market. This was based on a comparison between the costs of such facilities and the average area income of sen iors in this age group. At that time, the average monthly costs for market-rate assisted living ranged between $1,472 and $2,517 (amounts self-reported and averages based on efficiencies, one-bedroom, and two-bedroom units ; rents may not include any type of minimal medical care). Yet one in four seniors statewide aged 75 and older had a monthly income at or below $884 (from the U.S. Census Bureau, 2000), and 50% of the annual median area in come ranged from $17,300 to $23,550 (from the U.S. Department of Housing and Urban Development).

Based o n the study's estimate that approximately 5% of the state's seniors aged 75 and older would be willing to move to assisted living and would have need of services, the state needed 3,662 additional units to meet this demand . If more than 50% of this population could not afford market-rate assisted living, then an estimated 1,831 aff ordable units were needed.

This gap between what was needed and what people could afford was accentuated by the inability of assistance programs to make up the difference. Because the Medicaid Waiver Program pays fo r the costs of personal and medical services only, the costs of rent and board are paid by the tenant. Market-r ate assisted living programs at the time of the study rarely had rent and board rates below $800. They were sim ply not purpose-built as affordable properties and, therefore, had capital and staffing costs that significantl y exceeded this amount.

It is well known that the additional services referred to most commonly as bo ard-including activities, meals, and emergency response-help prevent assisted living residents from develop ing conditions that would lead to placement in an institutional setting. Furthermore, reducing social isolation and depression and providing adequate nutrition and hydration clearly benefit elderly and disabled residents.< BR>
A June 2002 report to Congress from the Commission on Affordable Housing and Health Facility Needs for S eniors in the 21st Century, titled "A Quiet Crisis in America," summarized the human side of this critical prob lem in this way:

    …A large and growing number of seniors will face triple jeopardy: inadequate inco me, declining health and mobility, and growing isolation. …For some, family supports disappear when they outl ive spouses or when children move to a distant place. For others, old age is a time of discovering that, with d eclining or fixed income, they are simply unable to purchase the goods and services they need.

    …For th ose fortunate enough to have caring families nearby, their caregivers may face more stress than they can endure . When family, friends or caregivers search for help, they often encounter confusing requirements and eligibili ty standards as well as exorbitant costs. Those in rural areas face a dearth of available services….

    . ..[The] result of this could be a substantial increase in costly and premature institutionalization of older pe ople. …Nursing facilities should be places that care for the very ill and not the only alternative for people who cannot afford to live elsewhere.

Mirroring these concerns, the home health agency we have collaborated with for our affordable assisted living program was experiencing these problems one-on-one, frequently discove ring that low-income individuals had few choices as their level of care changed. As a home care agency, they we re able to serve clients in their own homes, thereby extending their ability to be independent as long as possi ble, yet there came a time when these individuals needed more assistance or socialization than could be provide d in their own homes. Assisted living was very appropriate for these individuals, but because of the rising cos t of assisted living facilities, they were forced into nursing homes so they could receive services that Medica id only covers if those services are provided in a nursing home. Tragically, the healthcare providers found a d irect correlation between these individuals' entering nursing homes and their declining health.

Through a home health agency's use of Medicaid and the Elderly Waiver, delivery of the same services is allowed in an i ndividual's home or apartment if that person can sustain his or her home and afford the cost, and if his or her condition is compatible with a supportive housing arrangement. Individuals living alone often do not have such a supportive housing arrangement, but it is present in an assisted living facility.

The state program t hat had been designed to assist frail seniors with the cost of assisted living paid such a limited percentage o f the program cost that many-in fact, most-market-rate assisted living facilities did not accept residents usin g the Medicaid Title 19 Waiver Program. Clearly, there was, and still is, a critical need for an effective solu tion to the problems of this vulnerable population.

Our Planning P rocess
Our goal was to respond to this critical need by providing assisted living communi ties that would not only offer an affordable option for moderate- to low-income seniors, but also would maintai n the same quality and scope of housing and services as those available in market-rate assisted living communit ies. This meant we had to develop facilities that could take advantage of a variety of financing options to low er development costs, as well as developing facilities designed to minimize operational costs, so that we could pass the savings on to future residents in the form of lower rents without sacrificing high standards in housi ng and services.

We also wanted to harvest everything that had been learned to date about the relatively new concept of assisted living and bring this information to bear upon the assisted services, programming, and interior design of these facilities to facilitate our goal of providing a place where independence and wellnes s were encouraged, families remained engaged, and seniors felt safe and supported while living purposeful lives .

Our Method
One effective means of developin g affordable housing is through tax credit financing, whereby developers receive tax credits in exchange for pr omising to provide affordable rental units for a specified period of years. They sell these tax credits and app ly the proceeds to lowering the cost of the mortgage, thus enabling them to pass on the savings in the form of lower rents.

Two problems created barriers to our using this approach:

  • Tax credit fundin g parameters prohibit the use of tax credits in nursing homes, and many investor funds prohibit any investment in tax credit projects that provide health-related services.
  • Any services that are mandatory for our r esidents must be included in the rent, and rental rates in tax credit housing must be maintained at or below a set amount based on the median area income for the county in which the facility is located. To reflect the cost of services in our rental rates therefore would have clearly exceeded our household rent guidelines for afford able housing.

It was clear that we faced significant hurdles to providing both affordable housing and quali ty assisted services within the same assisted living project if we followed the established model in the existi ng assisted living market. Instead, we determined that to accomplish these goals required developing an innovat ive approach, one first proposed by the Iowa Finance Authority: combining the Low-Income Housing Tax Credit (LI HTC) program with other state and federal subsidy programs to build the affordable housing units and establish affordable rent levels, while separately tapping into the State Waiver Program (primarily the Title 19 Waiver P rogram) and other subsidies for the elderly to cover assisted services.

In essence, our plan separates h ousing from services. Under this program, housing and services are purchased separately, and all services are o ptional. Seniors may rent apartments in the facility and either obtain the optional services from the building owner or its affiliates, or obtain them from any provider they choose. The same is true with meals: Residents m ay purchase a flexible meal plan from us, cook on their own, or have meals catered to them if they wish.

Such coordinated services require detailed policies and procedures to ensure that the facility's licensing req uirements are met by all vendors and that there is uniform delivery of apartment-related services, health- and home-related services, and related programming. It is this successful delivery of coordinated services for the apartment-as well as assisted health and homemaking services, meals, and social programming-that enables our pr ogram to respond effectively to the critical need for affordable assisted living.

Based on the requireme nts established for our tax credit housing program, referred to as Section 42 Housing, to be considered "afford able," rental housing must be available for no more than 40 to 60% of the Area Median Income. In 2004 and 2005, those figures translated into rental rates of:

2004 Rent Rates:

1 bedroom:

    40% – $483< BR>60% – $724

2 bedroom:

    40% – $580
    60% – $870

2005 Rent Rates:

1 bedroom:

    40% – $500
    60% – $750

2 bedroom:

    40% – $600
    60% – $900

Our original target dates included openin g in March 2005 and achieving full occupancy of 56 units by March 2006. Our on-site assisted services provider set its three-month goal at ten clients.

The Iowa Department of Elder Affairs commissioned a statewide, county-by-county study of the need fo r assisted living. We used that report, in addition to our own market study, to document and support the need f or a facility in the Ames, Iowa, market.

Our tax credit financing required that we rent only to persons with the following maximum household incomes: $27,060 for one person and $30,900 for two in 2004, and $28,020 f or one person and $31,980 for two beginning on February 11, 2005. Therefore, we targeted our mailings to people aged 70+ in households with incomes of less than $35,000 within a 50-mile radius.

In consultation with our partnering home healthcare agency, we selected income-qualified tenants according to criteria set forth in the state assisted living regulations. These criteria included stipulations that residents' service needs not e xceed 28 hours per week and that residents could not require more than a one-person assist. All residents were to wear a 24-hour call pendant to access on-site medical assistance 24 hours a day, seven days a week. At this time, we chose not to be dementia-specific and to accept only tenants who did not have a cognitive disorder.

As noted previously, our challenges b egan even before we officially got started, and they persisted at each main juncture. For example:

1. We had to redefine the concept of assisted living, which had previously been associated with package plans that i ncluded both housing and services. We created a new paradigm by separating housing and services to make both mo re affordable by enabling seniors to qualify for lower-cost programs and local, state, and federal subsidies in both areas independently.

2. We had to gain the confidence of the tax credit investment community and c onvince them that we could organize our management structure to satisfy the funding parameters of the tax credi t program; i.e., separating the tax credit ownership entity from the healthcare services while providing adequa te service to residents.

We submitted project pro formas to regional and national syndicators and invest ment brokers. Many of the syndicators fund via multi-investor funds, which include Fannie Mae and Freddie Mac, both of which prohibit investment in tax credit projects that provide health-related services. It was at the el eventh hour, just before the contingent purchase agreement redemption period expired and the carryover agreemen t deadline, that we obtained a sufficient letter of intent from our investors to allow us to buy the land and p roceed with completing our due-diligence requirements.

3. Finding a willing home healthcare provider pro ved equally daunting. First, delivering quality services at a profit remains a tough job in any medical model. Second, no local home healthcare provider had operated in the proposed assisted living environment. In fact, ta ckling this project required totally rewriting policy and procedure manuals that merged the different requireme nts and regulations of home healthcare and assisted living. These standards are very different, and developing procedures to fulfill both sets of regulations proved very challenging. We relied heavily on the resources of t he Iowa Finance Authority and the Iowa Department of Inspections and Appeals to guide us in writing these polic ies and procedures and to provide insight regarding the obstacles we might face.

This challenge proved t o be so difficult that our initial home healthcare provider withdrew from the project two years after we began working with the company and just six months before we opened. Fortunately, we had already been in dialogue wit h another company, Lutheran Community Health Services, that was interested in providing the same service for a future project we planned 35 miles away, and that provider bravely stepped in to meet this challenge under extr emely demanding conditions.

4. Not surprisingly, such a project requires an extremely high level of dedi cated teamwork, mutual respect, and a commitment to a vision of a model that was literally being created day-to -day in a just-in-time framework. Every form, every page of every manual, every paragraph in every marketing pi ece, every legal document-literally everything associated with defining and operating this program-had to be de veloped, designed, written, and produced by a member of our team. Different perceptions of appropriate guidelin es and procedures had to be openly discussed and resolved to mutual satisfaction so that, in the end, the resid ents would be appropriately served. This process remains an ongoing challenge and will continue to require comm unication and negotiation among the providers of housing, healthcare services, meal plans, and activities. To d ate, this challenge has been successfully met, based on resident satisfaction indicators (see "Evaluation").
5. We had to build our brand image from the ground up, since we were offering a new concept in a new fiel d. We had no reputation to build on or history to point to, so we had to develop a place for ourselves in the c ommunity. We thought it was a tribute when someone who was recently asked, "Where did you hear about us?" respo nded: "Where haven't I heard about you! Everyone's talking about you!" Best of all, much of that talk is originating from our residents, their families, caseworkers, and other community members whose enthusiasm help s to market our community and produces our best referrals.


May 2001

  • State study indicated critical need for affordable assisted living u nits: More than half of state's seniors age ≥75 were unable to afford existing market-rate assisted living c ommunities.

June 2002

  • Report to Congress reinforced awareness of critical problem for seniors with moderate to low income who needed assisted living services.

July 2002

  • Ini tial developer began looking for a site and made first contact with potential home healthcare agency to provide on-site assisted living services.

August 2002

  • Initial developer contacted city govern ment (staff and city council) to seek support.

November 2002

  • City council voted to app rove the tax abatement essential to the project and rezone the property, and they gave the project a formal res olution of support. (Note: This vote passed on November 12; the tax credit application deadline was three days later.) The developer picked up the supporting documentation from the city on November 15 and hand-delivered th e application to the Iowa Finance Authority the same day.
  • Received letter of commitment from initial ho me healthcare provider to serve as available on-site assisted living services provider.

March 2003

  • Iowa Finance Authority awarded tax credits to initial developer.

August 2003

    Early-bird mailing generated initial list of 41 potential residents/couples.

September/October 2003< /b>

  • Because of difficulty in locating investors, a second developer was recruited to identify neces sary investors before tax credits expired in December 2003.

November 2003

  • Original carr yover date (date that 10% of the cost of the project must be expended) was extended to December 20, 2003, becau se of difficulty in securing an investor.

December 2003

  • Investor was secured; tax credi t carryover was completed just in time to meet December 20, 2003, extended deadline. Contingent purchase agreem ent was closed and land purchased just prior to expiration of redemption period.

May 2004

    Ground was broken for the building. Part-time marketing consultant and community liaison was contracted. September 2004

    • Designers contracted to begin interior design of public rooms.
    • Fir st home healthcare agency withdrew from potential collaboration, less than six months before first residents we re expected.
  • October 2004

    • RN Administrator was hired as a consultant to prepare documen tation for facility application to Elder Affairs Department.
  • December 2004

    • Assisted serv ices provider agreement was executed with the second home healthcare agency to provide optional on-site assiste d services.
    • Administrator was hired, and first applicants completed their formal applications.
  • February 2005

    • State granted Certificate of Occupancy (February 4) and Facility Operating Licens e (February 25).
  • March 2005

    • First resident moved in on March 5; Grand Opening was held o n March 13.
  • June 2005

    • Half of all units were filled; we projected that all units would b e filled by October 2005, based on pending applications.
Key Players
To address such a c ritical need and produce such a strong, positive response in the marketplace has required incredible efforts fr om our highly dedicated team of professionals from diverse sectors, including: real estate development, finance , investment, law, healthcare, marketing, training, design, food and nutrition, senior care and activities prog ramming, and maintenance. Each team member, drawing from his or her own set of skills and experience, has contr ibuted in a unique way to launching this groundbreaking concept in assisted living. Here, identified by positio n only, are the players and their contributions in the order they joined the team:

Initial Develop er: He used his knowledge of, and experience with, the existing assisted living industry to recognize t he need and opportunity described in early studies of senior living conditions. He also conceived the vision fo r our program and entered the political arena to gain support for the project, as well as identifying a viable site and initiating the first steps for the tax credit financing.

Second Developer: A lawy er and developer of affordable multifamily housing, he entered at the crucial juncture when a lack of investors jeopardized the project. He filled the critical role of finding a willing investor, purchasing the land, and c ompleting the carryover. Since then he has assumed the role of managing general partner, doing everything from overseeing construction to writing policies and procedures to assembling furniture.

Marketing Cons ultant, Community Liaison, and Interior Designer: This is another multitasker whose business, education , public relations, and creative experience and talents have been effectively applied to researching resident n eeds and trends in assisted living, and who has incorporated that knowledge into: (1) an effective public relat ions and marketing campaign, (2) the establishment of a customer relationship management model, (3) development of service learning projects with university faculty and students, and (4) codesigning the public rooms to cre ate distinct environments that produce a variety of settings within the community to match the tastes and prefe rences of residents while encouraging their interaction and enjoyment of activities.

Second Interi or Designer: A lawyer by day and a decorative artist by night, she applied her artistic eye to the choi ce of colors, furnishings, art, and general décor to produce a beautifully appointed facility that has drawn ra ve reviews for its warmth and style. Each public room was designed to create a different impact, appropriate fo r its use, so that even residents whose limited mobility greatly restricts their travels may enjoy a variety of environments and varied visual stimulation each day.

RN Administrator: Although she had b een employed by the home healthcare provider only three weeks when she was asked to step in and oversee the col laborative tasks associated with developing this joint program over just five months, she never flinched. Inste ad, she set about to make it happen. She contributed heavily to the writing of the new procedures and policies and to securing the facility operating license, while working closely with the developers to establish how the housing and services would be coordinated.

Administrator: She quickly applied her passion for senior care-kindled when she was just a teenage volunteer-as well as her experience, formal training, and n ewly acquired MHA degree, to launch a new concept in senior care. She developed policies and procedures, forms, and training in a just-in-time manner and quickly developed a warm, yet efficient, relationship with residents .

Branch Manager, Home Healthcare Provider: A 30-year veteran of healthcare environments a nd a dedicated caregiver, she has applied her multisite management experience and her warmth and "tough love" a pproach to create efficient and effective delivery of healthcare services. She has attracted and trained a < b>Nursing and Assisted Services Staff, whose sincere and caring relationships with residents have great ly contributed to the high regard people have for our services. Her strong following by former clients has also resulted in their referring residents or becoming residents themselves.

Chef: Formerly a catering chef for a major university, as well as a chef for a four-star restaurant, our chef enjoys preparing r esidents' favorite foods while maintaining the required standards for senior nutrition. He has developed a repu tation for excellent food and offers cooking classes to residents. With quality of food often named the number one reason seniors favor a given facility, he has been one of the major reasons for our popularity and enviable reputation. An Assistant to the Chef and a Dietary Aide assist in food preparation and serving.

Maintenance Supervisor: He keeps the building and grounds in top condition a nd responds to residents' housing needs. He is an important link in customer satisfaction because he is the tro ubleshooter who first responds to residents' problems in their homes and addresses necessary improvements to ke ep them satisfied.

Activities Coordinator/Assistant Director: Our newest team member, she brings her experience in not only directing senior activities but also in coordinating volunteers to enrich our residents' engagement with their community. Her role is vital in fighting the effects of depression and reduci ng the possibility of social isolation, with the ultimate impact of improving attitudes and enjoyment of life. She coordinates the activities sponsored by our optional social club for residents.

The Rose of Ames Team Leaders

Angela Adam, Administrator
Vicki Trub y, Activities Coordinator/Assistant Director
Don Sturtz, Chef
Mark Skadburg, Maintenanc e Supervisor
Candace McClenahan, Marketing Consultant, Community Liaison, and Interior Designer
Richard Helgeson, Co-Owner and Developer
Gregory McClenahan, Co-Owner and Developer
Dianne McClenahan, Interior Designer

Lutheran Community Heal th Services Team Leaders

Diana Hanner, RN, Administrator
Lou Ann Wil liams, Branch Manager, Ames
We anticipate full occupancy by March 2006, a lthough instead of the projected 10 clients expected by the assisted-services provider within the first three m onths, 18 residents were being served by that date. These achievements reflect the conservatism of the forecast ed need for affordable assisted living for seniors with moderate to low incomes and the success of this model f or addressing that need.

Subsequent months have seen the opening or planned opening of similar projects in Des Moines and Waterloo. Roughly a dozen are in the works altogether.

Resident Data
The statistics for our first 28 residents as of spring 2005 tell the story of our success:

  • Whereas 61% (17) moved from their own home, mobile home, or affordable in dependent living apartment where they lived alone, 68% (19) now request assisted services to help them when nee ded, and 100% of them wear a 24-hour emergency-response pendant for summoning help from on-site staff. This tra nslates into better care and peace of mind for both our residents and their families and friends. Services most requested, in the order of frequency, are: housekeeping, 50% (14); nurses' aide visit, 43% (12); bathing assis tance, 32% (9); skilled nursing visit, 29% (8); medication monitoring and administration, 25% (7); dressing ass istance, 14% (4); and shopping assistance, 11% (3).
  • Documented results of this care include: 18% (5) w ith decreased depression, 18% (5) who are eating healthier, and 7% (2) who now self-administer medications and previously required assistance.
  • The remaining one-third (9) who do not contract for any services have t he best of two worlds: They live totally independent lives in their own apartments, complete with fully furnish ed kitchens (including dishwasher), while knowing that a full range of services, including healthcare, housekee ping, shopping assistance, assisted bathing, beauty and barber shop, and a wide array of activities and communi ty events, is available if they choose to participate. Once again, they have peace of mind, knowing that when t hey need services, they can access them on-site in their own community and home.
  • 79% (22) have joined t he optional activities and social club designed to provide entertainment, socialization, activities, education, and purposeful engagement in the community, thus reducing the potential for social isolation and depression an d increasing residents' sense of engagement and purposeful living. Participants develop new interests and skill s, as well as new friendships.
  • 79% (22) participate in the meal plan; 36% (10) eat one meal a day in th e main dining room, and 43% (12) eat two meals a day there. This meal plan has been directly correlated with he althier eating in 18% (5) of the residents. Each meal is approved by a dietitian to supply one-third of the min imum daily nutritional requirements for elders.
  • 11% (3) have moved from market-rate assisted living fac ilities, and 11% (3) have transferred from nursing homes. Both situations have resulted in cost savings to resi dents and their families. Residents moving from market-rate assisted living facilities are preserving their fin ancial resources and slowing down the spending of their limited savings. Residents moving from nursing homes ar e no longer paying (or receiving higher subsidies) for the unnecessary (for them) higher level of care in nursi ng homes. This results in lower costs both for residents/families and government agencies.
  • 18% (5) have moved from the homes of their adult children where they resided because they needed assistance but were unable to afford market-rate assisted living. Not only do residents express appreciation for regaining their independ ence, but the adult children also report less stress on themselves and their families.
  • In addition to t he obvious benefit of more affordable living, the next most frequently cited benefit that all residents attribu te to their new home is their preserved independence paired with greater peace of mind. They can choose what as sistance they want and need, and pay only for those selected services.
  • Our population matches the typi cal assisted living population: We currently have 5 male residents and 24 female residents in 28 households, ra nging in age from 52 to 96. The average age is 76.3, and the median age is 77.5. All are single except for one married couple. Although there was high initial interest in our four two-bedroom units, all units rented to dat e are single bedrooms.

Resident Satisfaction
The June 9, 2005, Initial Certification Monitoring Evaluation Report completed by the Iowa Department of Inspectio ns and Appeals included the following Tenant/Family Satisfaction Results:

    A community meeting was he ld and 14 residents attended. The residents reported their apartments and common areas are clean and they feel at home. Residents reported staff to be competent, efficient, and friendly. Residents stated the administrator is approachable, listens to concerns, and seems to care about them. Residents reported they never lock their ap artment doors at night; most said they leave their doors open during the day. Most of the residents stated they administer their own medications, but the nursing staff answers questions about medications and services they receive. Residents stated they make their own decisions and come and go as they please. Residents like the food served and stated there are plenty of choices offered. Residents believe there are plenty of activities offere d by the program and they are getting the services they expect.

In summary, we believe we have not only add ressed a critical need in long-term care but also exceeded our goals and objectives. We hope that recognition o f our program will motivate other developers and investors to replicate our success.

To send your comments to the editors, p lease e-mail optima0406@nursinghomesmagazine.com.< /FONT>

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