When private retirement housing developers step on a nail, the U.S. Department of Housing and Urban Development (HUD) hollers.

Chances are that most, or all, of your long-term care (LTC) planning clients live in privately financed housing, and they may be thinking of using reverse mortgages to pay for any LTC services they need. But one way to understand the forces shaping private housing for older Americans may be to look at what HUD is doing. HUD officials often say in public what private developers are saying behind closed doors.

HUD officials gave a look inside the sausage factory recently when they drafted an update to the Section 202 elderly housing finance program regulations.

The Section 202 program provided loans, and later grants, that helped developers create about 117,000 subsidized rental units for elderly Americans. Many of the early developers received 40-year loans. Little new government money is available, and the original loans are starting to mature. HUD wants to help the owners get their loans refinanced and use the cash to renovate their properties and turn some apartments into assisted living units. HUD also wants to encourage managers to offer more units to frail elderly people.

Both managers of the HUD Section 202 elderly housing financing program and private developers face the effects of the aging of the baby boomers, the damage the Great Recession did to the boomers’ finances, and conflicting ideas about how and where people with disabilities should live.

For a look at why the Section 202 regulation update might interest LTC planners, read on.

Dollar bill1. If any of your LTCI clients do end up in HUD-subsidized elderly housing, they could get a good deal.

Most HUD-subsidized apartments for the elderly look for applicants with income under 80 percent of the “area median income” (AMI), and many prefer applicants with income under 50 percent of the AMI. The average U.S. cut-off for having a very-low-income one-person household is $22,350.

But, especially in wealthier communities, 50 percent of AMI may be relatively high. In Connecticut, for example, the very-low-income threshold for a one-person household is $30,250.

When managers of HUD programs calculate whether applicants meet income eligibility criteria, they include wages, periodic payments from annuities and retirement plans, and regular benefits payments from disability insurance or life insurance. 

HUD program managers exclude $180 per day in private LTCI benefits payments.

HUD programs also exclude any cash applicants and families spend on guaranteed-renewable LTCI premiums. “Payment of long-term care insurance premiums is an eligible medical expense,” according to a HUD guidebook.

See also: Court blocks restrictive state Medicaid annuity practices

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2. The Section 202 update could shape how policymakers think about who needs long-term care.

Today, LTCI issuers often pay benefits when insureds either suffer from severe dementia or are unable to handle two or more “activities of daily living” (ADLs) — bathing, dressing, dining, grooming, toileting and walking.

Government agencies assessing people’s abilities also ask about “instrumental activities of daily living” (IADLs), such as the ability to cook, clean, shop, take medicine and use the telephone.

Doctors use the term “frail” to refer to people who are slow or weak.

When HUD officials developed their proposed Section 202 regulations, they included incentives for project managers to serve the “frail elderly.” They defined “frail elderly” to mean people who have trouble with at least three ADLs.

Colleen Bloom, a housing operations specialist at LeadingAge, a long-term care (LTC) provider group, wrote in a comment that HUD officials are using “frail” differently from how doctors use the term. She suggested that HUD ought to expand its definition of “frail elderly” to include older people who have trouble with at least one ADL, or at least one IADL, and who also need help with chronic health conditions.

Including people with chronic health problems in the definition could help housing programs work better with chronic care management programs, Bloom said.

See also: Underwriting, frailty and older age applicants

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3. The Section 202 drafting process shows how urges to help people efficiently can conflict with fears of getting interest groups riled up.

The U.S. Supreme Court ruled in 1999, in Olmstead vs. L.C., that separating people with disabilities from other people without a good reason is a form of illegal discrimination.

In the proposed Section 202 regulations, HUD officials included incentives for projects that target frail elderly people. To address concerns about discrimination against people with disabilities, they also included a ban on clustering units for residents with disabilities in certain areas.

Bloom said using personal health status information to decide who gets the subsidized rental units might strike some as discriminatory. Using health status information to limit access to units might be illegal in some states, she said.

But, at the same time, she said, property managers may need to create clusters of units for people with disabilities for practical reasons. “Frail seniors dependent on assistive devices (walkers, canes, etc.) may need closer proximity to a co-located service provider, or the ability to easily access transportation pickup points,” she said.

Instead of using regulations to control how properties work, HUD should let consumers shape properties by making voluntary decisions about where to apply to live, Bloom said.

See also: Home care planning: 4 things LTC planners should know about the new regs

Image: Knights (TS/Dima Sobko)

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4. Turning ordinary elder housing into assisted living communities can open cans of worms.

Diane Yentel, a vice president at the Enterprise Community Partners Inc., an organization that develops subsidized housing, commented on a provision in the proposed HUD regulations that could help owners pay to turn apartments in subsidized properties into assisted living units.

The owners would have to get the assisted living units licensed by a state or local agency.

Something as basic as requiring assisted living facility licensing could be impractical, because investors aren’t prepared for that, commenters said.

“This is especially the case when licensure requires that the property owner hold the license, employ staff directly, and bear responsibility to provide care, because affordable housing lenders and investors, which expect properties to be owned by single-purpose entities with no employees, are unwilling to take on liability related to these activities,” Yentel said.

See also: Activists at retirees’ gate mean gains for Brookdale

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5. Housing policymakers might have unrealistic ideas about money.

One provision in the proposed HUD Section 202 regulations would provide money for renovations of existing properties by encouraging investments in projects likely to “reduce operating costs by more than the cost of the debt service,” such as energy efficiency efforts.

Members “have expressed concerns that “it is very difficult to source new financing based on presumed energy savings,” Bloom wrote.

Yentel said many HUD-subsidized properties have urgent capital repair needs and may not be able to find enough energy savings or other operating savings to use the savings to finance recapitalization needs.

Image: Unicorns (Catren Moore)

See also: Bill Nelson: Will Alzheimer’s bankrupt us?