Comparing 3 Types of Senior Living Communities
There are vast differences in the various types of senior housing communities. These differences apply to how fees are assessed, whether an occupant owns their residence and the levels of care that they offer on the premises. The following types of senior living are the three most common models.
Rental Senior Communities
These communities are the most popular option in the country and in most cases are the least expense of the three options. Rental senior communities require a lease and usually some type of security deposit or community fee. This community fee may or may not be refundable.
Typically, a rental community will offer independent living and have an assisted living facility on the premises should someone need additional assistance. Some even offer memory care and skilled nursing care. These higher levels of care are provided at an extra cost in a rental retirement community. There is no contractual obligation for the community to provide to this care, so it might be necessary for a tenant to move out if they need a higher level of care that is not available in their complex.
In addition, if someone has depleted their assets and can no longer afford their rental payments, they would need to move out. Since there is no large up-front fee or complex medical and financial eligibility criteria, many people are attracted to the rental option. This is especially true for those who have a preexisting condition or do not want to make a long-term obligation. Such flexibility is also beneficial if a spouse passes away and the widow or widower is interested in relocating to be closer to other family members.
Rental communities usually provide a variety of services and amenities that are built into your monthly payments. These can include meals, housekeeping, maintenance, transportation and on-site events and activities. It is worth noting that residents’ rental rates can be increased at the renewal of your lease term.
Equity or Ownership Senior Communities
An equity or ownership-style senior community is a fee-simple arrangement where the resident actually purchases their unit and enjoys full ownership privileges. As in a traditional real estate deal, pricing is usually negotiated with the previous owner. There are obviously pros and cons to owning real estate, but this type of community is attractive to those folks who want to own something and probably enjoy some level of equity appreciation upon resale.
Residents pay a monthly maintenance fee as well as condominium association dues and are responsible for covering real estate taxes and assessments as well. Renovations to the condo are typically paid for by the new resident taking possession, however this could be negotiated in the purchase price. Should a resident require higher levels of care, there is typically assisted living available onsite for a per diem (daily) cost. Then again, if a higher level of care like around-the-clock skilled nursing care is needed, the resident would need to move out and sell their unit. However, upon move out or death of a resident, monthly fees still need to paid until the condo is resold, which can pose some challenges for sellers and surviving family members.
Continuing Care Retirement Communities (CCRCs)
A CCRC is a type of senior community that offers a full “continuum of care,” including independent living, assisted living, skilled nursing and memory care all on the same campus or within the same building. There is an up-front entrance fee as well as an ongoing monthly charge. In most states, CCRCs are strictly regulated by the Office of Insurance Regulation. Unlike some other senior living options, there are financial and medical criteria that residents must meet in order to qualify to move in. This is because once you are accepted in a CCRC, the community is contractually obligated to care for you no matter how your medical condition or financial situation changes. CCRCs are not for everyone, but for the folks who do qualify, they enjoy the peace of mind of knowing that they have a guaranteed care and all these components are located on the same campus.
Typically, CCRCs attract a younger population and more couples than the rental option. CCRCs vary on how much care is included in your monthly costs and how much of the up-front entrance fee is refundable. CCRCs also differ in the timing of the return of the refundable portion of the entrance fee. Some of these communities will refund it within a specified time such as 60 to 90 days, and others will provide the refund upon resale of the apartment. The amount of the refund also varies significantly as well. It is important to understand that the entrance fee is not equity and there will not be any appreciation of your initial investment when you move out. Most CCRCs will offer one, if not all of the following types of contracts:
Type A: Residents will pay the same monthly charge regardless of the level of care that is needed.
Type B: Residents receive a discount on future health care charges, but their monthly payments will still rise as their needs increase.
Type C: Residents pay a lower monthly rate, but will pay full per diem rates for higher levels of care.
Which Type Is Right for Me?
There are pros and cons of each of these options, therefore it is important to carefully assess your medical and financial situation before making a decision. Meeting with an experienced senior housing advisor can also be extremely beneficial in helping to determine which might be the best fit for you.