Cutting Costs on Construction
Assisted-Living Development With a Factory-Built Twist

By George Allen, GFA Construction

As the senior-housing market expands, developers continue to examine a variety of building options, particularly to cater to the low- and moderate-income seniors, which represent a much larger group than the affluent elderly (see Table 1). One viable, cost-effective and yet untapped option is factory-built housing.

Before raising an eyebrow or scoffing at the mention of factory-built housing, one should recognize that most development in the housing industry--be it for multi-dwellings or a private home--incorporates elements of factory-built housing. Many homes/apartments feature pre-hung door and window units, as well as wall panels and pre-fabricated floor and roof trusses.

The challenge is to understand the differences among the levels of senior housing and the four types of factory-built housing to determine the best development avenue to pursue.

Levels of Senior Housing

There are numerous types and definitions of senior housing, but for purposes of this article, we will limit the field to three: independent/congregate care, assisted living and continuing-care retirement communities.

Independent living/congregate care. According to The State of Seniors Housing, published by the American Senior Housing Association (ASHA), these facilities "are designed for seniors who pay for some congregate services (such as housekeeping, transportation, meals, etc.) as part of the monthly fee or rental rate, and who require little, if any, assistance with activities of daily living." For the best return on investment, the optimum aggregate size is 101 to 150 living units. Annual resident turnover is about 27 percent, and the average residency is three years.

Assisted living. Capital Sources for Real Estate describes assisted living as "a senior living complex with physical features designed to assist the frail elderly with staff and programs that assist residents with activities of daily living. Units may have kitchens, but meals are provided in a central location." Some sites may also offer skilled-nursing or Alzheimer's care. Although there is a great debate on the best size for an assisted-living facility, for investment purposes, the optimum size is 51 to 100 living units. Resident turnover is 55 percent, with a two-year average tenancy.

Continuing-care retirement community (CCRC). According to ASHA, the definition of CCRC is a "senior living complex providing a continuum of life, including housing, healthcare and various support services. Healthcare (nursing) services may be provided directly or through access to affiliated healthcare facilities." Here the optimum size is 201 to 350 living units. A study by the Journal of Housing for the Elderly found that seniors select CCRCs based on how well the facility provides guaranteed health maintenance (83 percent), supportive services (60 percent), safety and security (48 percent), independence from family (35 percent) or increased social opportunities (35 percent).

Factory-Built Housing

As mentioned, four major types of factory-built housing account for 95 percent of new housing units constructed today. They are defined as follows:

Production (site) builders represent 36 percent of the factory-built housing market. These are builders of homes and/or commercial buildings, constructed on site to the provisions of conventional codes. More than 95 percent utilize some factory-built components such as roof trusses.

Panelizers account for 39 percent of the factory-built housing market. These are factory builders of two-dimensional walls, roof and floor trusses, furnishing the rest of the "package" needed to complete a home. They are built in factories to the provisions of conventional building codes. This is a very broad category today that includes conventional-home package producers, mass merchandisers who perform all functions of conventional panelizers, and a growing number of alternative building systems including structural insulated panels, steel panels, plastic panels, foam blocks, log homes and pressure-treated wood panels.

Hud-Code Manufactured Homes represent 19 percent of the factory-built housing market. These are six-sided structures built in factories to the provisions of the Manufactured Housing & Construction and Safety Standards of the department of Housing & Urban Development (HUD). They must include longitudinal steel chassis beams as part of the foundation and/or floor system.

Modular total 6 percent of the factory-built housing market. These are six-sided structures, both commercial and residential, built in the factories to provisions of conventional building codes.

Benefits of Factory-Built

What can the senior-housing marketplace learn from factory-built housing? There are even greater production efficiencies, higher quality control and lower ultimate product costs to be realized using modular and manufactured housing (HUD-Code) units, and there are worthwhile lifestyle alternatives within the manufactured-housing arena.

The following summarizes the benefits of using just HUD-Code manufactured housing single and multi-section units:

• Versatility of design and installation, along with relative ease of transportation and siting.
• Generally one-third to one-half the cost of comparable-sized, stick-built housing units, even when senior-housing specialty-design features are included.
• Built to a federally preemptive, national construction standard.
• Readily financed and insured, either with a chattel (personal property) mortgage when sited in a landlease property or a conventional mortgage when permanently affixed to a parcel of privately owned land.
• Ease of maintenance due to efficient layout, design and single-story nature of the housing product as a convenience for seniors.

Furthermore, when modular units are used, most of the above benefits apply (except for the national construction standard), including the following:

• Opportunity for increased production volume, even more design flexibility (e.g., stackable modules).
• All-but-guaranteed delivery dates, as units are fabricated indoors, not subject to the elements, vandalism and inventory problems.
• Fewer on-site work crews needed than when building one board at a time.

Planning the Community

Perhaps the first step in mapping out the perfect "aging-in-place" community utilizing factory-built housing begins with the independent-living component. Ideally, this would involve the development of a PUD-like (planned unit development with individually owned homes) landlease community where homeowners aren't burdened with site maintenance. Residents may purchase or lease the manufactured homes already in place, and pay monthly rent for property management, local taxes, etc. When residents need more personal services, the care can be contracted out, and the resident will be duly charged. A number of assisted-living functions may still be possible within residents' homes, especially if features like grab-bars and panic buttons are in place. The ideal situation is to keep residents in their homes as long as possible; however, should they need higher levels of care, the community could provide another unit within the higher-acuity environment--but still within the community---allowing them to keep the same friends and remain in familiar surroundings.

A Case in Point

Within the factory-built housing industry, one of the very best examples of continuing care for seniors is found at Lakeshore Villas Retirement Community on the north edge of Tampa, Fla. Lakeshore Villas was founded as a 200-site landlease manufactured-home community (formerly mobile-home park) two decades ago by Roland Gehring, who grew his investment property right along with the housing needs of his residents. Today, the Goehring family offers all levels of senior housing, from independent living through skilled-nursing care, allowing the non-retired and retirees to live comfortably in the same manufactured-home community. Should a resident of the independent-living area require some assistance with daily living, they can move to The Inn at Lakeshore Villas, an assisted-living apartment built in 1990 and, if or when necessary, onto the Lakeshore Villas Health Care Center, a skilled-nursing facility opened in 1986. Altogether, Lakeshore has 600 living units on 80 wooded acres capable of accommodating more than 800 residents.

This isn't the only such property in Tampa. On the west side of town, Rocky Creek Village features a co-mingling of older, conventional and newer, specially designed manufactured homes--some single family, others as triplex living units--as well as a chapel, convenience store and recreation facilities. In addition, there is a dining hall, a skilled-nursing facility and a separate hospice unit.

There are also instances where owner/operators of manufactured-home communities retrofit existing landlease properties and homes to accommodate their senior-housing needs so that longtime residents will not have to leave the community and their retirement friends. When retrofitting an existing manufactured-home community to accommodate senior housing, the developer might consider the following:

Property Changes

• Driveways are widened, if necessary, and ramped to the threshold level of the manufactured homes, eliminating the need for residents to climb stairs.
• Streets are smoothed to ease travel by electric carts and tricycles.
• If needed, a dining facility--which can also be used as a recreation or meeting center--is added.
• A facility and services for health mainte nance and rehabilitation are added.
• Clubhouses/facilities are designed with no-glare lighting, low ambient noise, textured non-slip floors and handicap-equipped restrooms and features.
• Improved security and fire alarms (e.g., gated entrances to property) are installed.

Housing Changes

• Grab-bars are added as needed.
• Doors are widened.
• Larger shower units are installed.
• Personal emergency-response systems, and security and fire alarms are installed.
• Undersink clearances are provided for wheelchair-bound residents.
• Interior lighting is improved as necessary.
• Commercial-grade, low-loop pile carpeting is installed.
• Standard laundry machines are replaced with front-load models.
• Countertops are lowered.
• Electrical switches and outlets are made more accessible.

Summary

With a little investigative research, a developer will likely conclude that much of the senior-housing marketplace should be shaped to accommodate the middle- and lower-income resident. With this in mind, developers will need to find cost-effective construction alternatives. Factory-built housing is likely the most affordable, quickest-to-erect construction alternative available today and, therefore, should command the attention of astute assisted-living developers and providers.

George Allen, CPM, is the assisted-living specialist consultant to the HUD-Code manufactured-housing and manufactured-home community industries in the United States. He is founder and head of GFA Management Inc. and PMN Publishing. Mr. Allen is the author of many magazine articles and four popular real-estate development and investment textbooks featuring the use of factory-built housing. He also publishes and distributes the Allen Letter each month to clients and subscribers. Mr. Allen may be reached at GFA Management c/o P.O. Box 47024, Indianapolis, IN 46247; phone (317) 888-7156.

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