Navigating Senior Housing Communities: Managing Risks and the Rise of Private Equity

The decision to move into a senior housing community is rarely simple. Beyond the personal and emotional considerations, there’s a financial side that deserves careful thought, especially as private equity is creating a shifting landscape. 

If you’ve been hearing about fee increases and ownership changes in senior housing communities, you’re not alone. Recent headlines have left many people wondering: What’s really going on? And what should I do about it?  

Here’s what I want to emphasize: Don’t panic. Approach your choices as a thoughtful process of considering your options as you navigate life’s road ahead. Manage your risks, just as you would with any other major life decision. 

Why Private Equity is Gaining Ground 

Private equity (PE) firms own only a fraction of senior housing communities, but their presence is growing. Senior housing communities require ongoing investments for new amenities, updated buildings, and evolving services to meet residents’ needs. Private equity firms see this as an opportunity to bring in capital and modernize communities. 

At the same time, their investment goals can mean higher fees or shifts in priorities that might not always align with residents’ expectations. Knowing this helps you ask better questions and weigh the trade-offs. 

But private equity is just one factor in deciding where to live. Whether you’re thinking about an over 55 community, independent or assisted living, or hybrid ownership models, understanding your options, and managing the risks involved, can help you make a confident, well-informed choice. 

Over 55 Communities (HOA-Based Communities) 

Over 55 communities are typically owned outright by the residents. An elected homeowners association (HOA) manages maintenance, landscaping, snow removal, and common areas. These communities often offer a strong sense of neighborly connection; something my wife, Ann, and I have appreciated in our own experience at English Commons. 

Risk Management 

• Fee Increases: Homeowners Association (HOA) fees rise over time, typically reflecting higher costs for services, not profit-taking. The advantage of HOAs is their shared purchasing power; by pooling resources, homeowners can secure better prices than if they acted alone. 

• Majority Rules: Decisions are made by the community as a whole, through the HOA board. While you may not agree with every decision, it’s part of living in a shared environment. 
• Protect Yourself: Take time to read the HOA bylaws and master deed carefully and consider having an attorney review them. Understanding these documents upfront will help you avoid surprises later.
   

Independent & Assisted Living Communities 

Independent and assisted living communities offer a supportive environment. Housing, meals, transportation, social activities, and care increase as your needs change. These communities are often owned by large corporations or investment groups, including private equity firms. 

Risk Management 

• Fee Structures & Increases: Monthly fees can increase over time, and residents typically have little control over how much or how often. Make sure you understand how fee adjustments are calculated and how much notice is required. 

• Ownership Changes: Ownership transitions can sometimes result in fee hikes or changes to contract terms. While PE-owned communities represent only a fraction of the overall market, their growing presence has raised concerns as stories of significant fee escalations or changes in service priorities have circulated. 

• Protect Yourself: Ask about who owns the community and whether there has been recent turnover in ownership or management. Read the contract carefully, with particular attention to fee escalation clauses and how care transitions are handled. An elder law attorney can help you spot red flags and clarify your rights. 

Hybrid Ownership Models 

Some communities allow residents to purchase their living unit while still paying monthly fees for services. In these models, when you leave or pass away, the community typically buys back your unit for a percentage of its original value or market value. 

Risk Management 

• Understand Refund Terms: These can be appealing, but they often come with trade-offs such as a reduced buyback amount. Make sure you understand the exit terms clearly, especially if your health outlook or time horizon is uncertain. 

• Assess Overall Value: Compare the buy-in structure and monthly fees with other options. Depending on how long you plan to stay, it might be more cost-effective, or less so, than a rental model. 

• Protect Yourself: Read the contract’s refund clauses and buyback terms in detail to ensure they align with your financial and estate goals. 

How We Recommend Managing These Choices 

Every senior housing option has its own blend of benefits and risks. Here’s our advice: 

• Read Everything: These contracts are complex. A lawyer who specializes in elder law can help you spot risks and ensure you’re making an informed decision. 

• Look Past the Brochure: Marketing materials paint a rosy picture, so dig deeper to understand how fees are set, what services are truly included, and how decisions are made. 

• Seek Professional Guidance: We believe in decisions made in conversation, not in isolation. Financial advisors and senior housing specialists can provide perspective on how these choices fit into your broader life goals. 

• Remember What Matters Most: At the end of the day, these decisions are about more than real estate, they’re about finding a safe, supportive, and enjoyable place to call home. 

Conclusion 

Every senior housing option has its trade-offs. Private equity’s growing presence in senior housing is real, but it’s just one factor to consider. By thinking of these trade-offs as manageable risks and by gathering good advice and asking the right questions, you can find a community that truly supports your well-being and peace of mind.