Developers Devise Solutions for the Missing Middle

by Jeff Shaw

By Bendix Anderson

The problem can seem too big to solve.

Many seniors can’t afford private-pay seniors housing, such as independent living, assisted living or memory care. But millions of those potential residents also have too many financial resources to move into housing reserved for low-income seniors.

By 2029, there will be 14.4 million of these “missing middle” seniors. 

A few developers have new ideas about where these seniors might live. The prototypes of their new middle-market seniors communities are now under construction.

From licensed assisted living in Florida to a life plan community in Massachusetts to new communities in Ohio that will bring health services to seniors housing residents, developers are now creating new communities that
middle-market seniors can afford to move into.

Millions more coming

In 2014, there were 20 million seniors over the age of 75. Of that cohort, 8 million were “middle income,” meaning they had too much income to move into government-subsidized housing for low-income seniors, but they had too little income to afford private-pay seniors housing, according to the “Forgotten Middle” study from the National Investment Center for Seniors Housing & Care (NIC) and NORC at the University of Chicago, a research organization.

By 2029, the  number of seniors over 75 is expected to reach 33.5 million. Of those, 14.4 million will be middle-income.

More than half (60 percent) of that group is going to have limitations on their mobility; one in five (20 percent) will be “high needs” with at least one chronic condition and one or more functional limitation; and 8 percent will have some form of cognitive impairment, according to the report. 

That’s more than 1 million cognitively impaired seniors, including many with some form of dementia, who can’t afford seniors housing.

“There is definitely going to be a need for housing that can deliver some care to residents,” says Ryan Brooks, senior principal of healthcare strategy for NIC, which provided NORC a grant to conduct this first-of-its-kind study.

Elevate opens less expensive option

The seniors housing units at Elevate Clearwater rent for at least $1,000 a month less than comparable properties — including comparable independent living, licensed assisted living and memory care — in the pricey, waterfront community of Clearwater, Florida.

A two-bedroom independent living apartment at Elevate Clearwater rents for $2,500 a month, utilities included, according to developer American Healthcare Management Group (AHMG). 

Assisted living units rent for $4,100 a month, all inclusive, and memory care units rent for $4,800 a month without government development subsidies or rental subsidies. 

In comparison, nearby memory care communities charge nearly $6,000 a month. 

Elevate accomplishes these low rates with the efficient use of space and the efficient use of time — and by tapping into the energy of family members.

“We basically redesigned senior living,” says Joe Jasmon, CEO of AHMG and founding partner of Elevate. “But we didn’t want to sacrifice the amenities or the beauty.”

Elevate Clearwater includes 16 units of independent living across eight duplex buildings and 96 units of assisted living and memory care in another building with six wings. Each wing or “neighborhood” includes 16 apartments arranged around a hub of common area space, so there are no long hallways.

“We reduced the square footage from about 110,000 square feet to 55,300 square feet,” explains Jasmon.

Each hub is flexible space organized around a different amenity, such as a bistro, cinema space or library. 

There is no central dining room. Each neighborhood functions as a tiny restaurant with a kitchen and a pleasant space to eat. Chefs in Elevate’s central commercial kitchen prep food that is heated and served by staff in the neighborhoods. Seniors can order the food they want when they feel like eating. 

“I think that a lot of people get stuck in thinking customization should always cost more,” says Jasmon. “We’ve all been trained to speak about the factory model. But, when you’re dealing with human beings who are not exactly the same, it doesn’t need to cost more. It just means we need to think differently.”

Elevate accomplishes its foodservice goals without needing to hire more full-time chefs by using time more efficiently.

“Your chefs are already there all day,” says Jasmon. “Why do the seniors all have to eat at the same time? Most places are cooking a big tray of eggs and a big tray of bacon or sausage. We end up throwing away less food and we’ve made it much better for residents because it’s customized.” 

Each neighborhood also has two Elevate staff members and a minimum of two volunteers for each shift. Elevate has already tested this volunteer model — called the Family Booster Club — at four other existing communities operated by AHMG over the last four years. Family members have proven to be eager to donate their time, even though they may already be paying the rent. Perhaps volunteering provides a healthy outlet for energy that family members might otherwise spend writing emails to management. 

AHMG has already applied for a permit to build its second Elevate community in Olathe, Kansas, located about 22 miles southwest of Kansas City,  and has acquired a site to build a third community in Lebanon, Ohio.

Opus builds middle-market CCRCs

2Life Communities, a seniors housing developer based in Brighton, Massachusetts, won’t open its Opus Newton community in nearby Newton until summer 2025.

Two years before opening day, the 174-unit community is already fully leased to future residents.

Price is part of the appeal. The cost to live at Opus is high — but not as high as the fees at comparable continuing care retirement communities (CCRCs). Opus can do this thanks to its efficient use of space and efficient staffing. 

Opus also taps into the energy of its own residents to volunteer to help each other and their community.

That allows Opus to provide a flexible, a-la-carte selection of services to its middle-market residents with fewer full-time staff members.

These residents — more than 200 of them — have each promised to contribute 10 hours a month in volunteer work to their seniors housing community. 

That adds up to the equivalent of about 55 full-time employees, organizing activities ranging from financial literacy classes to pot-luck dinners.

The future residents at Opus are already showing up to events organized by 2Life. Dozens signed up for the first Opus volunteer project. On Sept. 28, they will gather near the site of their future home, picnic together and create hygiene kits for kids in foster care in the area. 

“They’re not even living there yet,” says Sharon Adams Brooks, chief marketing officer for 2Life Communities. “But they’re already starting to do things together even before the walls are built.”

At CCRCs in the Boston area, the average monthly fee was $4,159 in the second quarter of 2023, according to NIC. Communities in expensive, suburban communities around Opus often charge $6,000 or $7,000 — even more than $10,000 a month, according to 2Life’s market studies.

In comparison, the monthly fees at Opus start at about $2,000 and top out around $5,300 for the largest two-bedroom unit. 

CCRCs also typically charge an entrance fee. This entrance fee is often nonrefundable or only 50 percent refundable when a resident eventually moves on. At communities near Opus where the entrance fee is 75 percent or 90 percent  refundable, the amount of the fees was often over $1 million, according to 2Life’s market studies.

The entrance fee at Opus is 80 percent refundable to the resident or his or her estate once a unit is vacated and reoccupied by a new resident. 

The amount of the fee starts at $439,000 for a one-bedroom unit and $751,000 for a two-bedroom unit. That’s a lot of money, but still low compared to the refundable fees at comparable CCRCs.

Similar to an independent living community, Opus will include a commercial kitchen and restaurant as part of its “Gather” community space.

“We found people don’t love three meals a day — they don’t like the idea of having to eat or lose it,” says Brooks.

Instead, Opus residents receive a “culinary credit” that can be used to pay for $400 worth of dining at the Opus restaurant. 

“They can use that for a full dinner, a quick breakfast or a sandwich at lunch,” says Brooks. 

Residents also receive “care navigation” to help connect to services they need, including healthcare. The staff at Opus will include a handful of “care navigators” who are either nurse practitioners or social workers and will help residents navigate the healthcare system and other support services. 

This healthcare model is expected to be significantly less expensive at Opus than it would be if residents tried to arrange the care while living in a single-family home.

“In your home you would have to pay a minimum of three to four hours of care at a rate currently of about $30 to 35 an hour,” says Brooks. “If you need a little help in the morning a little help and the afternoon you’re going to pay for eight hours of care.”

At Opus, the care navigators should be able to help residents schedule care in smaller, half-hour to one-hour increments. 

“If they just need a little help in the morning and a little help in the afternoon, they might pay a total of $30 to $60,” says Brooks.

Opus is located on the 23-acre campus of JCC Greater Boston, a community center in Newton, Massachusetts. Opus residents can become JCC members at a discounted (60 percent off) cost of about $30 a month to access the resources of the campus, including a fitness center with a swimming pool. 

Opus is also located next door to Coleman House, an existing community with 146 apartments affordable to very-low-income seniors. 

2Life developed Coleman House in 1984 with funding provided by the Department of Housing and Urban Development’s (HUD’s) Section 202 program.

Coleman House residents will be able to participate in everything that’s happening at Opus and be able to purchase meals at the restaurant there.

“We also are looking at future Opus developments,” says Brooks. The developer plans to begin to build more Opus communities once it can show the success of its completed project at Opus Newton. “We have it in our strategic plan to build another one within the next several years.” 

Developers adopt challenge

Many developers who build affordable housing using the Low-Income Housing Tax Credit (LIHTC) program have decades of experience with operating seniors housing without a large staff of caregivers.

Service coordinators often help low-income seniors connect with services at properties developed with equity from the sale of federal LIHTCs or financing from HUD.

Some affordable housing developers are now bringing this model to middle-market seniors housing — without reliance on government subsidies for development or to help pay rent.

Episcopal Retirement Services (ERS), based in Cincinnati, plans to start construction on a new seniors housing community for middle-income seniors in Batavia, Ohio, a rural village outside of Cincinnati. The developer is waiting for the capital markets to calm after the high interest rates and a string of bank failures in 2023. 

“We believe that we’ll be able to secure the bank loan that we need this year or early next year,” says Laura Lamb, president and CEO of ERS. “Our hope is to start construction next summer.”

ERS has already secured a site and drawn up plans for 120 rental units affordable to moderate-income seniors. 

The apartments will be arranged in a few dozen buildings on 25 acres, each combining two, four or even eight units together to look and feel like individual, one-story patio homes.

“You know that 1950s streetscape where you see small homes that offer great neighborhood design? That’s kind of what it looks like,” says Lamb.

The project will cost between $30 million and $40 million to develop, says Lamb. That works out to a cost per unit of $250,000 to $333,333.

Rents averaging about $1,500 a month should be enough to support that development cost without any government subsidy. The rents would be affordable to seniors whose resources are equivalent to an average income for that part of Ohio, says Lamb.

The developer has already achieved part of that low development cost. It acquired the site at a low, undisclosed price, says Lamb. The large parcel provides room for 120 units in one-story, stick-frame buildings with no need for expensive elevators, stairs or even ramps.

ERS will also achieve low operating costs with a relatively small staff of workers to coordinate contractors for tasks like maintenance and landscaping. The community manager and a supporting staff member will also act as onsite service coordinators to help residents connect with providers of health services.

National Church Residences, based in Columbus, Ohio, also has a long history of building and managing affordable housing targeting low-income seniors. The nonprofit provider of seniors housing currently operates 90 communities in Ohio.

In November, National Church Residences will open 103 apartments priced for moderate-income seniors at Brookwood Point, an independent living community in the Berwick neighborhood of Columbus.

Monthly rents will average about $3 per square foot compared with the higher, $4 per-square-foot rents charged at other independent living communities in the Columbus area, says Matthew Rule, senior vice president of housing development and asset management for National Church Residences.

That works out to roughly $1,800 a month for a one-bedroom apartment at Brookwood, and roughly $3,000 for a two-bedroom. 

The developer signed an agreement with the City of Columbus to keep the rents for 15 of the units affordable to households earning up to 100 percent of the area median income (AMI), and another 11 units had to be affordable to households earning up to 80 percent of AMI.

“Fortunately, we already had a lot of units that were fitting in that,” says Rule.

The City of Columbus granted Brookwood Point a 15-year property tax abatement. “That real estate tax abatement was really instrumental in allowing us to hold down the rents,” says Rule. 

A local church also contributed the land for the Brookwood Point project at a relatively low price. 

Finally, National Church Residences Foundation also contributed about $10 million of the $34 million needed to develop Brookstone at very little cost to the project. 

The foundation asked for a yield of less than 5 percent, which is quite low compared with the minimum 15 percent yield usually required by equity investors in real estate developments.

The small staff at Brookwood will include a service coordinator who will help seniors connect with agencies that provide wellness education, healthcare services and more. They will also engage with volunteers and coordinate events. 

National Church Residences also locates the offices for service coordinators right next to the gyms at their communities. “It encourages residents to work with them,” says Rule.

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