LeadingAge Magazine · March-April 2020 • Volume 10 • Number 02

Providers Test Middle Market Models

February 16, 2020 | by Debra Wood, R.N.

Here is a look at how 3 LeadingAge members are addressing the middle market challenge.

A growing population of middle income older adults has created opportunities and challenges for LeadingAge members seeking to serve this market segment.

“It’s an underserved market that can be met uniquely by a nonprofit housing provider,” says Jon Fletcher, vice president of Senior Housing Partners, the real estate development team for Presbyterian Homes & Services, based in Roseville, MN, which operates about 50 communities.

Fletcher acknowledges that not as much attention has been paid to middle income housing as to high-end or affordable housing. But the middle market fits with the organization’s strategy to meet an unmet need while diversifying revenue and payer streams.

National Church Residences, based in Columbus, OH, aims to serve the underserved, and added middle market housing to its affordable housing portfolio to be able to help more older adults, reports Mark Ricketts, president and CEO. The organization operates 330 campuses.

“Our mission is now expanded to include middle income seniors,” Ricketts says.

Givens Communities in Asheville, NC, also has entered the middle market to serve a greater number of older adults.

“We have always had a mission to serve all income levels,” says Teresa Stephens, affordable communities director at Givens. “There are a vast number of people in the middle market.”

Defining Terms

In general, the middle market refers to people earning income or possessing assets too high for subsidized housing but not enough to enter a life plan community. Middle income varies based on the cost of living in a region.

Caroline F. Pearson, senior vice president of NORC (National Opinion Research Center) at the University of Chicago, was the lead author of a 2019 paper in Health Affairs which described the middle income cohort of adults age 75 to 84 years old in 2029 as having “annuitized financial resources of $25,001-$74,298 in 2014 dollars.”

Pearson’s study projected that by 2029, 14.4 million older adults will be in the middle income category. Among them, 60% will have mobility limitations, and 20% will have high health care costs. Fifty-four percent of older adults will not have the resources to pay for such care.

Middle market older adults have fewer family caregivers than in the past. Nearly half are not married. They have had fewer children, and those children often will not live nearby.

Scaling Up Affordable Living

LeadingAge members are taking different approaches to serving this population.

Givens Communities began operations in the late 1970s with 78 HUD 202, Section 8 units. Over the years, the organization increased its affordable housing, added a life plan community and investigated how to serve the middle market. Givens often turned away people who were above the income/asset limits for HUD housing, but who could not afford life plan units.

Initially, the organization researched different ways to serve middle income older adults, before embarking on a model for Givens Gerber Park, designed to scale up from affordable living with supportive services. The organization received financial support for the community from The Duke Endowment.

“We did things in middle market housing that affordable housing cannot easily do, such as adding a café, commercial kitchen, and clinic space,” Stephens says. “The apartments are similar.”

Givens Communities photo
Givens Gerber Park is aimed at middle market residents, and bases rents on income rather than square footage. The idea is to scale up an affordable housing model by adding services. Photo courtesy of Givens Communities.


Residents in their affordable living and middle market units share amenities. The apartments feature similar modest finishes. The organization always includes community space.

Middle income residents pay a monthly fee based on income, rather than the size of the apartment. A certain number of apartments are dedicated to different income levels, divided into $5,000 bands.

“This is the most radical thing about our model,” Stephens says. “We do not base rent on square footage. The rent is based on income. It has worked very well for us.”

Residents understand the rental policies before they move in, and Stephens reports it has not caused squabbles among tenants paying different amounts.

“We are up front with people that the fees are based on income,” Stephens says.

If a resident’s income decreases, they can drop to a lower monthly fee. Then, Givens rents the next middle market apartment available at the higher amount that resident had been paying. If a resident’s income decreases significantly, the resident can move to an affordable unit in the same community.

“This gives us remarkable flexibility,” Stephens says.

Givens avoids the cost of transferring people between apartments, and it helps to maintain high occupancy, a key to success with middle market communities.

“Your budgets and margins work like affordable models, and you watch every penny and dime,” Stephens says. “Avoiding vacancy loss is very important.”

When a tenant moves out of an affordable or middle income apartment at Givens, the organization tries to fill it again within 3-5 days. There is a wait list, making a quick move-in of a new tenant possible.

Residents cannot customize apartments in affordable or middle income units, since turnover would take longer. (In Givens life plan communities, the units can be customized, and it might take months to fill a vacancy.)

Givens employs a lean staffing model, since employees are a big expense. The organization hires social workers to provide care coordination.

“Social workers are the foundation of supportive services,” Stephens says. “They are crucial to helping residents age well in place.”

Givens also employs a nurse, who educates residents and works closely with the social-work team.

“It’s a cost-effective approach,” Stephens says. “It helps reduce turnover and decrease the number of people who need to go to higher-level care.”

Some residents will need to move to memory care or skilled nursing, and social workers help with that placement, often in a skilled bed at a Givens life plan community.

While planning a community, Stephens recommends designing with the end goals in mind.

“The most important thing that happens here, and helps residents succeed, is overcoming social isolation,” Stephens says. “It’s about quality of life. There are people around all of the time, playing cards or having lunch with friends. We create the framework in which that social interaction happens. They blossom when they get here.”

A Closed Architecture Continuum

Senior Housing Partners uses a closed-architecture continuum, providing all services needed, with its communities offering several levels of care. Typically, that means independent living, assisted living, and memory care under one roof. Annually, about 20% of the organization’s independent living residents transition to assisted living or memory care, keeping those units filled.

“By having all 3 services offered on-site, we maintain consistency in occupancy and revenue,” Fletcher says. “Residents do not need to go outside our housing or service offerings to meet a need.”

The organization strives to provide housing residents desire, developing home-like communities. Amenities and finishes are more modest in middle income units than in a life plan community. Fletcher assesses utilization of amenities when determining what to include. For instance, an ice cream shop may have low utilization, whereas a community space might enjoy higher demand.

At the same time, the organization tries to keep operational expenses down, so rents cover costs.

“We try to balance charging rents residents can afford while paying our staff a wage that allows them to meet their needs and not feel pressure to job hop,” Fletcher says.

The organization tries to maintain high-occupancy levels, which reduces marketing costs and provides a stable revenue stream. It also means lower risks for lenders and easier time covering debt payments. As with Givens, Presbyterian Homes & Services communities consistently have waiting lists.

“Having high occupancy has a lot of benefits, including creating a sense of community and home,” Fletcher says.

Presbyterian Homes & Services works to set rents at or below the rate of housing inflation.

“We gain affordability over time through tight operations,” Fletcher says. “We are not withholding services or upgrades. We manage tightly, so we can accrue savings over time and share that with residents.”

Additionally, Senior Housing Partners advocates for middle market housing with city and government leaders, explaining the needs of retiring teachers, police officers, and others.

Fletcher says he expects that the model can be replicated, even by smaller organizations. However, he adds, advantages exist with scale. The organization uses a hub-and-spoke model and has centralized as many operations—such as human resources, finance, engineering, and marketing—as possible. Some staff, including chaplains and fitness instructors, are shared across several communities.

Senior Housing Partners has created its model with private funds. Fletcher encourages LeadingAge members planning to enter this market to develop reasonable underwriting parameters. Then, if financial performance is better than expected, he advises to put those funds toward lowering rents.

“It’s not about squeezing out the last dollar, but about better meeting the needs of residents,” Fletcher says. “There is a huge […] need. It’s imperative that critical thinking be used to solve middle market housing, so more can be built and developed.”

A Mix of Scaling Up and Down

“I’m not sure if we are building up an affordable model or shrinking down a life care model,” Ricketts says. “We design it, so it is cheaper [to build and operate] than market-rate housing.”

National Church Residences also builds its middle market housing using private monies and expects to add 1-2 communities annually. The tenants pay rent, which covers the cost of the building and operating the community.

“It requires equity,” Ricketts says. “In our case, $3 million to $4 million worth of equity. You are highly leveraged.”

National Church Residences builds its middle market communities in mature, inner-ring suburbs, where older adults want to live, but that can create zoning challenges and limitations on size.

Podcast: Housing and Services for the Middle Market

Teresa Stephens and Mark Ricketts are featured, along with several other members, in an interesting podcast on serving the middle market, published in the September-October 2019 LeadingAge magazine.

Listen to the podcast on LeadingAge.org or on SoundCloud.

The organization’s middle market communities have fewer employees and activities than its life care communities. However, they still employ social workers to help residents stay in their apartments, perhaps with home health care at an additional cost. Each community also has assisted living, so residents can move into a higher level of care without leaving the community. National Church Residences also uses a hub-and-spoke model.

Common areas are smaller, about 25% of the middle market building vs. 50% in life care, and the units may be smaller and have less-expensive finishes. Residents receive breakfast but purchase other meals. The common-area cooking space and dining room are smaller than in life care communities and serve multiple functions. Food may be prepared off-site, at another community, and delivered and warmed. Menu options are limited. There may be one life enrichment staff member on campus compared with 2-3 in life care.

“You are looking for head count to be less to keep the price down,” Ricketts explains.

Even scaled down, middle market communities offer older adults the opportunity to make new friends, form relationships, and create resident-driven activities.

“None of us have this market figured out, yet,” Ricketts concludes. “But the demand is incredible.”

Debra Wood, R.N., is a writer who lives in Orlando, FL.