In August, senior citizens and the affordable housing industry got some great news from the U.S. Department of Housing and Urban Development (HUD): Aging in place just got a whole lot easier.
A memorandum was issued stating that all HUD Assisted Living Conversion Properties (ALCP) can now finance senior-friendly upgrades using the Multifamily Federal Housing Administration (FHA) Mortgage Insurance.
Put simply, not-for-profit, private multifamily property owners and managers now have more financial options to improve aging-in-place services for their senior residents. And this is a positive not just for industry participants, but for tenants as well.
What has changed
Since 2000, only 80 HUD senior facilities throughout the country could use ALCP grants to finance aging-in-place upgrades for senior residents. Through these grants, many owners and managers could convert existing apartments into assisted-living units.
However, there was a catch: HUD ALCP properties could not receive FHA mortgage insurance, and affordable housing properties with FHA mortgage insurance couldn’t turn to ALCP grants to finance senior-friendly renovations. But with this memorandum there are now more financial options and flexibility for not-for-profit, private multifamily property owners and managers.
The details of the memorandum
According to HUD: Section 236, 202 and 202/8, Direct Loan senior properties with ALCP grants can now use FHA Section 223(f) refinancing or Section 221(d) substantial rehabilitation programs.
This is an important development, as assisted living facilities need to be designed so the elderly can live on their own and “age in place.” Few homes are built for aging in place, and need to be modified with handicapped-accessible entryways and bathrooms, wider rooms and spaces, and lower cabinets and seating to accommodate older people. Many properties may also need to provide services for the elderly, including transportation, personal care and meals.
These modifications and services all require substantial renovations and expenses. By being able to pair ALCP grants and FHA mortgage insurance, owners and managers have more financial avenues to provide the physical environment and care that seniors need.
The benefits for property owners and managers
With the change, there are a number of advantages for property managers and owners. The most obvious benefit is financial. The ALCP grants will help fund any renovations needed to make a unit more senior-friendly. Owners won’t have to sacrifice an FHA-insured mortgage to acquire such a grant.
Now there will be more cash to convert these units. In addition, owners and managers also have increased cash flow for these projects. That allows them to allocate funds for more tenant services, helping residents and increasing the value of the multifamily property. In addition, residents realize the positives of a fully converted unit, from being able to age in place to the additional services afforded by the increased cash flow.
Generally, federal grants are not taxable at the federal level; however, please consult your Clark Schaefer Hackett advisor to determine the requirements for your particular situation.
How to apply for an ALCP Grant
Applications can be submitted each year after the Notice of Funding Availability is published in the Federal Register. Visit the HUD website for more information.