By Jack Cumming

Nonprofits dominate senior living — even market-priced CCRCs for affluent Americans. The obvious gain is the avoidance of federal income taxes and, in many states, property taxes as well. The downside is that financing options are limited, and customers may resist perceptions that senior living is no more than assisted living for doddering old people.

Blending the Divide

Seldom discussed, but well-known to experts, is that nonprofits can own for-profit subsidiaries and can invest in for-profit entities. Sometimes this is used to give the nonprofit parent flexibility it might not otherwise have. It can also be used to raise capital, equity capital.

Senior housing is a capital-intensive business requiring real estate, construction, and other investment. Moreover, that capital may have to go without earnings for long periods before occupancy and revenues reach a level at which a return can be expected. Anything along that development line that delays the process increases the capital investment, and with it, the time to positive earnings. It’s a tough business fraught with acts of nature and political maneuverings.

Embracing Consumers

It’s also a business that is heavily dependent on sales and marketing to overcome a reluctance of people to accept old age and to move in. Add to that the sales barrier of an entrance fee, and the marketing challenge becomes even greater. That window for a nonprofit to own a for-profit allows an alternative to ameliorate, if not eliminate, that barrier.

Nonprofits, and some closely held for-profits, have controversially used entrance fees as equity capital to secure enterprise debt much as a down payment on a home secures a mortgage. Changing that dynamic in favor of residents could help make congregate living more acceptable. By having a for-profit subsidiary own the residences, prospects, who might otherwise balk at paying an entrance fee, can be given a stake in the enterprise. Those shares can also come with a proviso that the parent nonprofit has a right of first refusal to repurchase shares if a residential unit is relinquished.

By opening financing to more creative alternatives, and by rethinking some of the basics —age limitations for instance — what’s now senior living can reinvent itself as better living. In the process, residents will have a better experience. People will be less fearful that moving in will render them as less than others who stay independent.

Entrepreneurial Positivity

Rethinking senior living for the decades ahead requires imagination and an entrepreneurial spirit. Creative financing is part of this. Some nonprofits may convert to shareholder ownership while keeping their commitment to the same principles they have adhered to traditionally. Those principles may be Quaker principles or Christian principles or simply principles of universal ethics. Others may be more comfortable with a hybrid model like that discussed above.

What seems inevitable, however, is that the top-down model for living — whether for seniors or for everybody — is giving way to a grassroots model. People want to have a voice where they live, and they want to be sure that they can feel safe, financially, physically, and emotionally. The romance of single-family housing still continues, though there is growing interest in the convenience and sociability of congregate housing.

At the younger end of the age scale, cohousing and coworking are becoming popular. At the older end, the village movement and other grassroots initiatives are gaining interest. While no one has a crystal ball clearly to see next year, much less the next decades, it is evident that rapid, and accelerating, change is propelling our culture.

The Future

To stay up with the changing consumer culture for better living will take astute leadership with the judgment to experiment and to winnow failure from success. The chance to change the American experience for the better is there for those who realize the vision.