Once an old airport hotel, The Ashford on Broad is a unique 131-unit affordable assisted-living community in Columbus, Ohio.
Pricey market-rate assisted-living developments have been built in the area, but this new development is reaching a population that wouldn’t typically be able to afford the services.
The project was developed by Wallick Communities, an experienced affordable housing company that has also developed market-rate assisted-living projects to a smaller extent during its long 51-year history. In recent years, the firm has been working on a model to build affordable assisted-living communities.
“Who’s taking care of the working class?” says CEO Tom Feusse. “No one was taking care of the middle-income or lower-income individuals.”
By 2030, the 65-and-older population will increase by 50% to 74.1 million, according to the National Investment Center for Seniors Housing & Care, which earlier this year announced awarding a research grant to study the “middle-market” population of seniors—the group between the lowest- and highest-income levels. Many in this group will be without adequate retirement and long-term care savings.
Feusse and his team have also been thinking about the changing demographics and the needs of lower-income seniors.
The average age of people in assisted living is about 88, Feusse says. “They are beyond their working years. If they don’t have significant means—and a lot of people who are 88 don’t have significant means in terms of income or assets—they’re in trouble if they have a need for assisted-living services.”
In addition to housing arrangements, these facilities provide personal care and some health services for people who may need assistance with daily-living activities such as bathing and dressing. They do not provide the intensive medical care provided in a nursing home.
Seniors often have two choices—live at home alone and be at risk as their health declines or move into a nursing home at taxpayers’ expense when they don’t need skilled-nursing services.
With the need only growing larger as the senior population surges, Wallick has opened The Ashford on Broad in Columbus and The Ashford of Mt. Washington in Cincinnati to provide affordable options.
The firm is making a percentage of the rooms at the developments available under the state’s Medicaid waiver, where Medicaid can be used to pay for assisted living. Feusse estimates that about half of states have such a waiver.
However, even in many of the states with a waiver, the community will not receive enough resources to cover the full costs of running an assisted-living facility. In Ohio, for example, the amount an individual, and thus the community, receives through Medicaid and Social Security is about $2,800 when market rents at an assisted-living community are about $4,000 to $5,000 per month.
At $2,800 per resident, the numbers don’t pencil out for a development that’s 100% for Medicaid residents, according to Feusse. Instead, the firm’s Ashford developments have roughly half their units for market-rate residents to help cover the costs of the Medicaid units.
“The market-rate would still be a value price point,” Feusse says. “If the market for a new community is $5,500, we may be around $3,800. We try to come in about 30% to 25% below the market on the market-rate units.”
For a developer, it’s critical to lower development costs when trying to deliver units at lower rents. To help with development costs, Wallick chose to rehabilitate existing buildings in their first two developments.
The Ashford on Broad used to be the Ramada Columbus Airport Hotel. Wallick paid roughly $2 million for the hotel and then put about $10 million into the conversion.
The 108-unit The Ashford of Mt. Washington was previously a senior apartment community that the firm acquired for approximately $2.6 million and renovated for about $5.5 million.
Wallick financed the developments using conventional debt for the first mortgage, which provided roughly 75% of the development costs. The company obtained a mezzanine loan from the Ohio Housing Finance Agency to get to about 90% of the cost and then used its own money to finance the remainder.
In the future, the firm, with its deep experience in using low-income housing tax credits (LIHTCs), may consider tax credits as an additional source. Some other developers have successfully blended LIHTC apartments with assisted-living units within the same development.
Initially, Wallick leaders wanted to focus on a model that is a mix of affordable and market-rate units, without the use of tax credits. One reason for this was to avoid the risk of narrowing the range of income levels of those residents looking for market-rate units.
They hope it will be a good business line that helps meet a key need. Wallick also recently broke ground on an affordable memory-care community in Ohio after developing a market-rate memory-care facility two years ago.
For developers, these communities may also help traditional affordable housing developers diversify their portfolios, Feusse says, adding that they wouldn’t have to exclusively rely on competing for LIHTC awards.
However, an assisted-living development can be more expensive to develop and requires additional expertise in delivering services.
“It’s about finding the right real estate, the right deal, and the right operator,” Feusse says.