There are two major problems in housing today, both relate to cost. The first is that the cost of housing, especially in areas restricted to single family residences, is rapidly rising. The second is that the skyrocketing costs of nursing home care for the elderly means that more seniors are “aging in place” — the elderly remain in their largely single family residences far longer than they did in the past. Many also struggle with fears of affording long-term care.
These problems seem to be irreconcilable, since aging in place means even less available housing available. But that is deceptive. In fact, it may be that the solution is not to address one or the other, but take advantage of “the cure” for one to solve the other.
In a recent interview with National Real Estate Investor, Assistant Professor Sean Huang, Ph.D., Georgetown’s Department of Health Systems Administration, noted that the rising cost of nursing homes have vastly outstripped the rate of inflation in states like New York (20%), Florida (29%) Vermont (29%), and California (30%). Since much of the long-term care costs are covered by the government, through Medicaid, Huang expects that the government will try to control those costs by having elders stay in their homes, where the costs of service is lower than in a nursing home. In most cases, these homes are single family residences, located in areas with restrictive zoning.
The Urban Institute found in 2015 that there was a 460,000-unit supply gap between the demand for housing and the supply. Despite the rebound since the housing market crash in 2008, single family permits are 47% lower than they were pre-crash. The vacancy rates are the lowest in decades and the rent rates the highest. At least four solutions to this housing crisis have been proposed:
- Invest in old, unused buildings, including factories, government buildings and warehouses
- Normalize tiny living solutions, especially in urban centers
- Create tax incentives for employers to help out with housing
- Remove restrictions on development of duplex housing in single family residential areas.
The removal of restrictions has already gone forward in cities like Minneapolis, MN. They are championed by several of the 2020 Democratic presidential candidates. The new rules allow an owner of a single family residence to add or convert space to the home to create an “in-law” apartment, thereby doubling the housing units without having to have families living on top of each other.
Providers may wonder: How does this help the aging in place of our elderly? Letting the elderly renovate the space in their home to accommodate their restricted mobility lets them stay in their house longer. But having a younger family member move to the remaining space allows an arrangement that the family earns equity in the property by providing support to the elderly individuals. This can potentially help elders afford the cost of a nursing home.
There are many unanswered questions in such an arrangement, such as how the services are supervised, whether training is provided, what safeguards there are to avoid abuse, and so on. Also, it is uncertain where costs and the supply of housing will go with the recent proposals for Medicare for All and rent control of apartments. That said, this could be, on a case by case basis, an elegant solution to these two thorny problems.
Matthew F. Erskine is managing partner at Erskine & Erskine.