Bridging the Affordability Gap in Assisted Living Putting the Pieces Together in New York May 2003 Council of Senior Centers & Services of New York City, Inc. 49 West 45 th Street, 7 th Floor - New York, NY 10036 212.398.6565 - WWW.CSCS-NY.ORG For more information, please contact: Bobbie Sackman - Director of Public Policy - ext. 226 Raquel Romanick, Esq., Legal Advocate - ext. 229
Table of Contents Summary of Recommendations...3 Introduction...4 Demographics...5 What New York Needs...6 I. Creating a comprehensive and flexible model of assisted living in New York...6 II. The need for a central coordinating government agency...6 III. The Medicaid waiver...7 IV. New York State should create a task force...8 The Integrated Financing Mechanism...9 I. Low Income Housing Tax Credit Program...9 II. Bonds...9 III. Project Based Section 8...10 IV. Real Estate Tax Exemptions...10 V. New York City Supportive Housing Grants...10 VI. VII. New York State Low Income Housing Trust Fund Program...11 State of New York Mortgage Agency...11 VIII. Supplemental Security Income...11 Conclusion... 12 Council of Senior Centers and Services of New York City, Inc. 2
SUMMARY OF RECOMMENDATIONS I. NEW YORK STATE SHOULD CREATE A FLEXIBLE MODEL OF ASSISTED LIVING ALLOWING SENIORS TO AGE IN PLACE: The assisted living model in New York should consist of independent apartments that offer a full continuum of a la carte services, from simple meals to Medicaid services, to address the needs of individual seniors. An assisted living program should be based on a residential model and not a medical model. Regulations should allow developers the flexibility to design a building that is capable of addressing a mixed income senior population in varying stages of care needs. II. THE NEED TO DESIGNATE A CENTRAL COORDINATING GOVERNMENT AGENCY: A coordinating agency should be established to create a one stop model to expedite the development of affordable assisted living projects. The coordinating agency should be created and modeled after the Housing Trust Fund, which has proved successful in facilitating the development of tens of thousands of units of affordable housing. The agency should be comprised of experts in the aging, health and housing fields. Representatives from DHCR, DOH, SOFA, HPD, HDC and HFA should all be a part of this newly formed coordinating agency. Development tools such as tax-exempt bonds, SONYMA mortgage insurance, project based Section 8, tax credits and capitals grants should be coordinated by this single agency so that the pre-development process can proceed quickly. III. NEW YORK STATE SHOULD APPLY FOR A MEDICAID WAIVER: The New York State Department of Health should apply to the Centers for Medicare and Medicaid Services for the option to have Medicaid cover the cost of assisted living services under a 1915(c) Home and Community Based Services Waiver as about 30 other states have already done. IV. NEW YORK STATE SHOULD CREATE A TASK FORCE: A task force should be created with local, city, state and federal officials, housing developers, health care and social services providers, private funders and advocates to create a comprehensive financing and operational program to support the creation of affordable assisted living. Council of Senior Centers and Services of New York City, Inc. 3
INTRODUCTION Assisted living facilities are crucial to the continuum of community-based care for the elderly. However, there are few affordable assisted living facilities available to meet the ever-increasing demand in New York. Assisted living is expensive for seniors as it is expensive to build, operate and maintain. A minority of seniors can afford to pay the market rate and only a few facilities are available for the very poor, who qualify for government subsidies. As a result, New York has limited affordable assisted living options for low and middle-income seniors. Many factors contribute to the lack of affordable assisted living in New York, including both the expense and lack of flexible regulation. Assisted living residences are expensive to build, operate and maintain, and as a result, these costs are passed on to residents. Additionally, government oversight is a challenging tangle of separate and distinct health and housing regulations. Conflicting proposed legislation adds to the mix. Since there is no system dedicated to developing assisted living, housing developers are left to fashion residences that are pieced together with other housing programs and health regulations, making it nearly impossible to navigate the system and create affordable assisted living. The time has come for New York State to take the lead in fostering the creation of affordable assisted living. The pieces that New York needs already exist in city, state and federal resources, but need to be accessed in an effective manner and tailored to the unique needs of assisted living. In fact, New York has an obligation to do just this. The 1999 Supreme Court decision, Olmstead v. L.C. 1 accelerates the priority of building affordable assisted living in New York. In Olmstead, the Court held that under the Americans with Disabilities Act 2 (ADA) states are prohibited from unnecessarily institutionalizing persons with disabilities. This means that states must serve those with disabilities in the most integrated community setting (or least restrictive environment ) possible. Assisted living offers an opportunity for New York State to uphold the Olmstead decision by preventing institutionalization and providing seniors with supportive housing. New York must plan for the building of assisted living facilities so that seniors in need of assistance can remain in their community. Expanding the affordable assisted living market is necessary to bring New York State into compliance with the Olmstead decision. Once a senior is placed in a nursing home, they are unlikely to have the resources to be released back to the community. Therefore, it is the prevention of nursing home placement that is key and that is where assisted living can play an integral role. 1 Olmstead v. L.C., 119 S. Ct. 2176 (1999). 2 Americans With Disabilities Act, 42 U.S.C. 12201. Council of Senior Centers and Services of New York City, Inc. 4
DEMOGRAPHICS WHO IS GROWING OLD IN NYC New York City is facing significant challenges in meeting the housing and support needs of its elderly population: The senior population will continue to grow from the 1.3 million people age 60+ in New York City. The fastest growing segment of New York City s elderly population, and of the population as a whole, is the oldest old, age 85+, which has grown 18.7% since the 1990 census. The number of New Yorkers, ages 75-84 grew 5.1% since 1990. Women account for 60% of all older New Yorkers and 80% of the frail population. Baby boomers begin to turn 60 in 2006 next age wave to hit New York. Income is not evenly distributed among New York City s elderly: According to the 2000 census, the median income in New York City is $10,451 per year for a single person over age 65 and, $14,125 for a couple. The poverty rate among older people in NYC is almost double the national rate, 20% compared to 10% nationally. Minority elderly now comprise 47% of the elderly, up from 35% since 1990. Minority elderly have the highest poverty rates with 24.3% living in poverty versus 8.5% for nonminority elderly. Older New Yorkers at or below the poverty level are surviving on $8,860 annually for a single person and $11,940 for a couple. Health status: Decline in chronic disability among the elderly will continue. However, there is a strong relationship between education, economic status and health. Minority populations have traditionally suffered from poorer health. Minority elderly are shown to have higher rates of need for assistance with activities of daily living than non-minority elderly. This trend indicates that this segment of the population has a high risk of converting to Medicaid, thus further straining New York s resources. As the elderly population continues to grow in number, poverty, diversity and insecurity, there will be an escalation in the number of people requiring housing and services. (For the full report, see Growing Old in New York, www.cscs-ny.org) Council of Senior Centers and Services of New York City, Inc. 5
WHAT NEW YORK NEEDS: I. CREATING A COMPREHENSIVE AND FLEXIBLE MODEL OF ASSISTED LIVING IN NEW YORK: There is much debate in New York over what the definition of assisted living should be. The Governor s office, the New York State Assembly and the New York State Senate have introduced a variety of legislation in an attempt to define assisted living. 3 To date, no such legislation has been enacted. CSCS advocates an assisted living program in New York based upon a residential model and not a medical model. Such a model would consist of independent apartments and a basic package to include meals, personal care, housekeeping, laundry, social activities, and service coordination. Offering a full continuum of a la carte services at these residences would provide seniors the choice of how to best accommodate their needs. When the parameters of assisted living are finalized in New York, it is crucial that the definition of assisted living remain flexible enough to accommodate the needs of individual seniors in varying stages of care needs. This is essential so that developers may design programs where seniors may age-in and the assisted living facility may continue to accommodate their changing needs. Additionally, it is important that this model is created to foster affordability and be built for a mixed income population. II. THE NEED FOR A CENTRAL COORDINATING GOVERNMENT AGENCY: The oversight for building housing with support services is currently fragmented between housing and health agencies. This fragmentation results in regulatory confusion and political instability over the reliability of funding. 4 This, in turn, exacerbates the concerns of private lenders and investors who view assisted living as a risky undertaking. 5 Therefore, CSCS proposes the creation of a central coordinating agency comprised of representatives from existing health, housing and aging related agencies and modeled after New York s Housing Trust Fund. This new agency should include representatives from the Department of Health (DOH), the State Office for the Aging (SOFA), the Housing Finance Authority (HFA), the Department of Housing and Community Renewal (DHCR) and in New York City, the Housing Development Corporation (HDC) and Housing Preservation and Development (HPD). Assisted living is a unique hybrid of housing and health regulations, therefore no one existing agency has the necessary expertise to properly coordinate the program. As the development of assisted living in New York continues to progress, such a multi-disciplinary agency will be capable of providing the one-stop coordination necessary to expedite the development and oversight 3 Assembly Bill, A.421 introduced by Assemblymember Steven Englebright; Senate Bill, S.511 introduced by Senator George Maziarz and S.601 introduced by Senator Kemp Hannon. 4 Jenny Schuetz, Affordable Assisted Living: Surveying the Possibilities, Harvard Joint Center for Housing Studies, January 2003. 5 Id. Council of Senior Centers and Services of New York City, Inc. 6
process. Through this collaboration, a system may be developed that integrates the financing mechanisms, supportive services and consumer protections necessary to create affordable assisted living. This type of collaboration between state housing and health care agencies to foster affordable assisted living has been successfully developed in other states. For example, Massachusetts has created an affordable assisted living model based upon the collaborative effort of the Massachusetts Housing Finance Agency (MHFA), the Massachusetts Development Finance Agency (Mass Development), and the Executive Office of Health and Human Services. Since 1996, this system has been successful in financing twelve assisted living facilities throughout the state, servicing over 860 seniors through a state Medicaid plan. As a high cost housing market similar to that of New York, the Massachusetts model should be closely explored. Taking a cue from Massachusetts and other states, no one division of New York State or local government should be expected to have the expertise necessary to develop the type of comprehensive system required to meet the needs of New York s elderly. By creating this hybrid agency, we can ensure that owners have the guidance necessary to provide the best care for seniors while allowing them to offer the most affordable options. III. THE MEDICAID WAIVER: New York State Should Apply for a HCBS Medicaid Waiver Critical to the financing of affordable assisted living is the need for a guaranteed flow of subsidy to cover the operating and service costs. This can be achieved through a Medicaid waiver. The New York State Department of Health (DOH) should apply to the Centers for Medicare and Medicaid Services (CMS) for the option of having Medicaid cover the cost of assisted living services under a Home and Community Based Services Waiver (HCBS). 6 This will allow New York the flexibility to develop and implement alternatives to current options while increasing incentives for developers to build affordable assisted living facilities. While the cost of Medicaid is a real consideration, we need to think creatively as to how to best utilize Medicaid dollars to reach a broader range of seniors. As of August 2000, about 30 states use the Medicaid waiver program to fund assisted living services. New York is not one of them. The states utilizing the waiver include: Alaska, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas, Maryland, Massachusetts, Minnesota, Montana, Nebraska, Nevada, New Jersey, New Mexico, North Dakota, Oregon, Rhode Island, South Dakota, Texas, Vermont (model waiver), Virginia, Washington and Wisconsin. 7 A Medicaid waiver allows for individuals to receive support services in an assisted living facility instead of being made to enter a nursing home. Waivers afford states the flexibility to develop and implement creative alternatives to placing Medicaid-eligible individuals in hospitals, nursing facilities or intermediate care facilities. The HCBS waiver program recognizes that many individuals at risk of being placed in these facilities can be cared for in their homes and 6 1915(c), Social Security Act. 7 http://www.aahsa.org/member/mesicaid.htm. Council of Senior Centers and Services of New York City, Inc. 7
communities, preserving their independence and ties to family and friends at a cost no higher than that of institutional care. 8 This step is desperately needed in New York, as a major obstacle to building affordable assisted living is the funding for supportive services. Other than the senior paying out-of-pocket, few subsidies are available for the portion of the monthly costs that cover supportive services. While New York does have the limited Assisted Living Program (ALP) 9, which utilizes state Medicaid dollars, there is currently no waiver mechanism for seniors living in assisted living to access federal Medicaid dollars. By utilizing the waiver option, more affordable assisted living facilities may be developed to serve near poor and moderate-income seniors who currently have no affordable options. This is possible through the waiver program because instead of the state plan in which the income limits must be set at the Medicaid/SSI eligibility level, under the waiver, the state may set eligibility up to 300% of the federal monthly SSI standard. 10 States have the flexibility to design each waiver program and select the mix of waiver services that best meets the needs of the population they wish to serve. 11 In New York, by utilizing a basic definition of assisted living under the waiver, a facility can be created that is capable of providing a continuum of care. This definition must be based on a residential or social model, rather than a health care model, so an array of services can be offered, but not required for each resident. Therefore, a housing facility could be developed that provides an array of individual apartments, meals, personal care, housekeeping, laundry, social activities, and services coordination. IV. NEW YORK STATE SHOULD CREATE A TASK FORCE: Utilizing existing New York programs and tailoring these programs to assisted living is the key to affordability. New York State should form a task force made up of city, state and federal officials, community based housing developers, health and social services providers, representative private agencies and advocates to create integrated financing mechanisms specifically designed for the development of affordable assisted living residences. Funding programs to be explored include: Low Income Housing Tax Credits, Low-Interest Tax-Exempt Bonds, Project-Based Section 8, the Housing Trust Fund, secondary financing, FHA insurance, Medicaid and the Robert Wood Johnson/Coming Home Project. The State Mortgage Agency of New York (SONYMA) should contribute to the development of affordable housing by providing full or partial insurance coverage during the construction process. CSCS has supported state legislation (A.6903 / S.3783) calling for a real estate tax exemptions for not-for-profit assisted living housing providers. The state should move to enact this important piece of legislation. By bringing all interested parties together in the form of a task force, New York State can ensure the success of affordable assisted living. 8 http://www.cms.gov/medicaid/1915c. 9 New York State Assisted Living Program. 10 State Assisted Living Practices & Options: A Guide for State Policy Matters, Robert Mollica, September 2001. 11 http://www.cms.gov/medicaid/1915c. Council of Senior Centers and Services of New York City, Inc. 8
THE INTEGRATED FINANCING MECHANISM: Putting the Pieces Together I. Low Income Housing Tax Credit Program (LIHTC) The LIHTC s are federal tax credits used to finance the development and rehabilitation of affordable housing to low-income tenants in rental buildings. In addition to these federal tax credits, New York State has created a state Low Income Tax Credit program. The state, through DHCR should develop a plan to allocate a fair share of these federal and state Low-Income Housing Tax Credits specifically for the development of affordable assisted living facilities. This is imperative because project applications for the tax credits are scored according to how well they meet selection criteria, which includes costs. Assisted living facilities are more expensive to develop than regular housing and it is difficult for an assisted living project to score high enough to receive the credits. 12 Therefore, recognition by DHCR of the special development costs of assisted living and/or housing with services and adopting a special class of cost standards for assisted living programs is integral to making progress on building affordable assisted living. Adjustments must also be made to DHCR's New York State Low-Income Housing Credit Qualified Allocation Plan (QAP). Since the QAP outlines the agency s selection criteria for the allocation of tax credits, this needs to be amended to address the financing of assisted living and/or housing with services. II. Bonds Utilizing tax-exempt bond financing can considerably lower development costs. There are two agencies in New York that can provide such financing: the New York State Housing Finance Agency ( HFA ) or the New York City Housing Development Corporation ( HDC ). These agencies issue tax-exempt private activity bonds which are used to pay for qualified project costs. 13 Depending on the developer and the type of project, there are several types of bonds available. The most beneficial for building assisted living are: Tax Exempt Bonds These bonds may be utilized by both for-profit and not-for-profit entities. Buildings financed under this section must set aside a minimum of 20% of units for persons whose income is less than or equal to 50% of the area median income or 40% of units for persons whose income is less than or equal to 60 % of the area median income. 14 The bonds are secured, in part, by a mortgage covering the project. 15 501(c)(3) Tax-exempt bonds - These bonds are available for not-for-profit entities to build assisted living residences. These bonds have lower interest rates than conventional 12 Ruth Guylas, How States Have Created Affordable Assisted Living: What Advocates and Policy Makers Need To Know, AARP Department of State Affairs, Fall 2002. 13 Charles Katzenstein, The Tools to Build 80-20 Housing, Metes & Bounds Real Estate Law Committee Newsletter, The Association of the Bar of the City of New York, June 2001 and Guylas p. 10. 14 AAHSA Development Corporation from Ruth Guylas, How States Have Created Affordable Assisted Living: What Advocates and Policy Makers Need To Know, AARP Department of State Affairs, Fall 2002. 15 Id. Council of Senior Centers and Services of New York City, Inc. 9
loans because investor earnings are exempt from federal taxes. Under the 1996 changes to the tax code, projects financed with 501(c)(3) bonds issued by "existing" corporations are exempt from many of the income-targeting requirements. 16 III. Project-Based Section 8 Project-Based Section 8 is a federal rent subsidy program whereby HUD contracts with state housing authorities to ensure that participants are provided with the best quality assisted living housing available. This program is unique in that the rent subsidy attaches to the unit and not to the individual, making the landlord responsible for ensuring that those units are leased only to qualified individuals. Under this program, the housing authorities contract with building owners who agree to make specific properties available for rent to qualified households. HUD then pays the landlord the difference between 30% of the household income and the contract rent, making this program an important piece of the financing model and vital to the creation of affordable assisted living in New York. Project Based Section 8 subsidies may be used as a forward commitment to finance the development of low-income senior housing. IV. Real Estate Tax Exemption Tax exemptions for non-profit developers are needed to encourage the construction of affordable assisted living facilities. Even though tax-exemptions already exist for builders of lowincome housing, they do not exist specifically to build assisted living residences. This type of tax exemption is a crucial development tool to lower the costs to seniors in assisted living facilities. Not-for-profit companies are forced to put up major equity dollars to develop a project. This pushes up the debt, which in turn, increases the monthly rate for the senior residents. Legislation proposing real estate property tax exemptions for non-profit assisted living housing providers has been introduced. 17 The state must move to pass this important piece of legislation. V. New York City Supportive Housing Grants Grants are typically needed to fund assisted living projects being developed by not-for-profit housing developers. Funding housing with supportive services is a concept that New York has fully supported and dedicated resources to in the past. The New York City Department of Housing Preservation and Development (HPD) has provided generous financing to not-for-profit organizations to develop supportive housing for the homeless through the Supportive Housing Loan Program (formerly the SRO Loan Program). This program provides housing in which formerly homeless, low-income and disabled people can live independently, with support and assistance provided through on-site social services funded by the city and state. Eligible not-for- 16 Virginia C. Fields, A Time to Build, Report of the Manhattan Borough President's Task Force on Affordable Housing, January 2000. 17 See: A.6903/S. 3783 Council of Senior Centers and Services of New York City, Inc. 10
profit sponsors include social service providers as well as housing and development organizations. 18 These funds should be extended to assisted living. VI. New York State Low Income Housing Trust Fund Program This is a very successful program operated by New York State s Department of Housing and Community Renewal (DHCR). In the past, the DHCR has had a special allocation for senior projects with services. It is critical that there is a continuation and expansion of this set aside for senior housing with services and that it be used in conjunction with low income housing tax credits. VII. State of New York Mortgage Agency The State of New York Mortgage Agency (SONYMA) is a public-benefit corporation of the State of New York created by statute in 1970. One purpose of SONYMA is to provide mortgage insurance for qualifying real property loans. In fulfilling its commitment to building affordable housing, SONYMA should devote more resources to building assisted living. Not-for-profit housing developers have found that they are unable to meet SONYMA s technical requirements for mortgage insurance on loans to build assisted living facilities. These technical problems include discounting government operating subsidies because they are riskier. In addition, SONYMA will not assume the lease up risk. This means that without a guarantee from the developer that 100% of the building has been leased, a project cannot secure a permanent takeout. When building for a population that includes low-income persons, subsidy income is a large part of the estimated revenue. Providing easier access to mortgage insurance and assuming part of the leaseup risk would provide significant steps forward to the realization of affordable assisted living. VIII. Supplement Security Income (SSI): A Supplement for Assisted Living SSI is federal cash assistance program that ensures a minimum level of income to persons who have obtained the age of 65, or are blind or disabled, and whose income and resources are below specified levels. In 2002, the SSI federal assistance level was $545 per month. New York State has chosen to supplement the federal SSI level with the amount of $435. SSI Level II is often used to cover room and board costs in senior housing. However, since this amount is insufficient to pay for room, board and services in an assisted living facility, New York State must create a multiple residential living option under the State supplement. For example, Massachusetts created SSI-G, a state supplement to SSI specifically for residents of assisted living to pay for room and board. Without additional supplements, the regulations of SSI Level II create operational costs that exceed project budgets and prevent this program from being more widely used. 18 http://www.nyc.gov/html/hpd/html/assistance/supportive-housing.html. Council of Senior Centers and Services of New York City, Inc. 11
CONCLUSION To increase the supply of affordable assisted living in New York the efforts of knowledgeable organizations must be combined to create a system that balances the affordability aspects of building independent housing within the reasonable confines of the need to supply support services. By utilizing funding programs that are already in existence and allocating resources to the development of assisted living, a support system of financing can be created that will spur the development of affordable assisted living. An assisted living Medicaid waiver in New York is critical, as this would provide a funding stream for low- income seniors to pay for the services in assisted living facilities instead of being placed in a nursing home. These steps, along with the support of New York State and local governments, are necessary to create the safe environment necessary for seniors to age in place with dignity. Council of Senior Centers and Services of New York City, Inc. 12