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When Is An Independent Living Facility Not One?

The “donut hole” in HUD’s coverage of the senior housing and healthcare continuum is for unlicensed, rental independent living (IL). HUD insures mortgage loans for skilled nursing and assisted living under the Section 232 program, but they limit the inclusion of unlicensed IL units in these projects to no more than 25% of the total. HUD’s standard multifamily housing mortgage insurance programs allow age-restricted housing (typically 62 years and older) but severely restrict the provision of services and amenities so common to independent living; and, the programs do not permit any skilled nursing or assisted living units. Rock, meet hard place!

Not so fast! Owners of nursing and assisted living projects with unlicensed IL units that exceed the 25% limitation may have an option to refinance through the Section 232 program, if the IL units meet eligibility as a “Board and Care” home.

What’s that? According to HUD, a Board and Care home (or board and care units in an otherwise eligible Section 232 project) must provide room, board and continuous protective oversight to its residents. Moreover, while a board and care project does not have to be licensed, it must be located in, and regulated by, a State that complies with Section 1616 e of the Social Security Act, better known as the Keys Amendment.

Currently, all but two states – Iowa and Oklahoma – comply, so the field is wide-open for healthcare projects with large and unlicensed IL components to qualify for Section 232 financing if they can meet the Board and Care test. We would be pleased to assist you in that evaluation.

Interest rates remain very competitive, and the long amortization – up to 35 years – and non-recourse provisions enhance the overall attractiveness of HUD-insured loans. Moreover, the LEAN program for processing and underwriting Section 232 projects remains robust: stay tuned because we’ll have some observations and insights about LEAN in a future article.

For more information, contact Anthony Luzzi at

Sims Mortgage Funding