Using LIHTC and knowing how to communicate with government agencies, this underserved segment is primed to grow
By Conchy Bretos
In seniors housing, proving that a new idea can be done is what makes all the difference.
That was certainly the case with the development of affordable assisted living projects using low-income housing tax credit (LIHTC).
LIHTC remains the best source of financing for affordable assisted living projects. Lowering your debt enables the operator to make these projects affordable and financially viable.
Some may argue that you cannot make new construction assisted living facilities affordable by using conventional methods of financing. Consequently, access to LIHTC funding has become very competitive. Developers must secure debt financing and stack multiple capital and operational funding streams, all while complying with strict requirements. It is not for the faint of heart.
In fact, navigating the financing, development, licensing and management requires strong determination. To begin with, we have to deal with at least four federal agencies (IRS, Department of Health, HUD and Medicaid) that do not talk to each other nor understand each other’s systems and regulations.
But, with the opening of two LIHTC affordable assisted living projects next month, we have proven that it can be done. Getting to the finish line includes skepticism and refusing to take “no” for an answer.
So what does it take to be successful? It definitely helps if the applicants have had solid experience in all aspects of finance, license and management. Expertise in these areas allows you to tweak the system and push back on rejections. It is very difficult for someone to say “no” to you if you are familiar with how the system works and what is allowable.
For example, one of the major obstacles we encountered was the IRS requirement that services be optional, as the IRS views assisted living as a residence. On the other hand, the Department of Health requires that services be provided to residents of a licensed facility. The Department of Health claims that not providing services is equivalent to neglecting residents.
Yet, entering an assisted living facility is totally voluntary. Residents chose to do so because they need the services to avoid institutionalization. Licensing regulations stipulate that the resident has the right to refuse services. This happens seldomly among assisted living residents.
Mia Senior Living Solutions has been licensing and managing affordable assisted living facilities for close to two decades. Our team has solid experience in LIHTC and affordable housing development. We are well versed in how to secure Medicaid waivers and Veterans Aid & Attendance service subsidies, in addition to rental subsidies.
Meeting income thresholds does not present a problem, as income eligibility is comparable among agencies. Physical plant requirements do not pose a problem either, as we develop projects that provide private apartments with full bathrooms and kitchens.
At the end of the day, all agencies want the project to be financially feasible and sustainable. In order to achieve that goal, identifying and securing all operational subsidies is essential.
The aging boom has made it imperative to provide services in community settings instead of institutions. Governments today realize that they must keep seniors at home to cut costs. A nursing home in the U.S. costs four times as much as care in assisted living facilities.
The movement in the past 10 years has been to fund home care services versus nursing home care. There is no way that this trend can be reversed. Funding for assisted living services has increased every year and only four states are left without a Medicaid waiver to fund services.
We began the journey of bringing LITHC assisted living to market. Standing in front of the doors of these projects is an amazing feeling. It gives us comfort to think that in doing so we have paved the way for others to do it, perhaps much more easily. Our biggest achievement has been that we have improved communication among these agencies, that today they understand each other better and at the very least they are now talking with each other.
Conchy Bretos is the founder of Mia Senior Living Solutions, a consulting firm serving the seniors housing industry.