There are many different types of housing options available to seniors, and the differences between them can be considerable. Key differentiating factors often include how fees are assessed, whether an occupant owns their residence and the levels of care that are offered on the premises. Explore the three most common senior living models below to see which one best fits an aging loved one’s needs and budget.
Rental Senior Communities
Rental communities are the most popular option in the United States and are usually the least expensive of the three models. These communities require residents to sign a lease and pay 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 for residents whose care needs increase, resulting in a need for additional assistance. Some offer higher levels of care, such as memory care and skilled nursing care, at an extra cost. However, there is no contractual obligation for the community to provide this care, so it might be necessary for a tenant to move out if their needs exceed what the community is able to provide.
In addition, if a senior depletes their assets and can no longer afford their rental payments, they would have to move out. Many people are attracted to the rental option because there is no large up-front fee or complex medical and financial eligibility criteria that potential residents must meet. This is especially true for seniors who have preexisting conditions 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 residents’ monthly payments. These can include meals, housekeeping, maintenance, transportation, and on-site events and activities. It is worth noting that rental rates can be increased upon renewal of an elder’s lease term.
Equity or Ownership Senior Communities
An equity or ownership-style senior community is a fee-simple arrangement in which a 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 most attractive to seniors who want to own something and hope to 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 individual units are typically paid for by the owner, 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 an additional per diem (daily) cost. Once again, if a higher level of care like around-the-clock skilled nursing is needed, then the resident would need to move out and sell their unit. However, upon a resident’s departure or death, monthly fees must still be paid until the condo is resold, which can pose financial challenges for sellers and surviving family members/the senior’s estate.
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 a hefty 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 both financial and medical criteria that seniors must meet to qualify for move-in. This is because once a senior is accepted into a CCRC, the community is contractually obligated to care for them no matter how their medical condition or financial situation changes. CCRCs are not for everyone, but the folks who do qualify enjoy the peace of mind of knowing that they have guaranteed care for life and that all these care options are provided in one convenient, familiar location.
Typically, CCRCs attract younger seniors and more couples than the rental option. CCRCs vary on how much care is included in the 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 60-90 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 this initial investment upon moving 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.
Choosing a Senior Housing Community
There are pros and cons to each of these options, therefore it is important to carefully assess a senior’s medical and financial situation before deciding. Meeting with an independent financial advisor or an experienced senior housing advisor can also be extremely beneficial in helping to determine which ownership model might be the best fit.