Many CCRCs require Entrance Fee Investments of a magnitude comparable to the cash equity investment that one might expect in a resident ownership context, yet very few CCRC residents sit on a CCRC Board of Directors. This has become a matter of controversy—and downright dissatisfaction—among many CCRC residents.
CCRCs offer a public benefit by allowing seniors to provide for their own costs of aging. That commitment to responsible action should not be penalized by arbitrarily depriving residents of input into the decisions that affect their lives.
NaCCRA believes it is the public interest that CCRCs operate with governance practices that balance:
Some CCRC Boards of Directors that exclude residents argue that residents have a conflict of interest that would inhibit them from increasing fees when needed to ensure the sound operation of the facility.
Others argue that residents can be naive concerning business operations and may make short-sighted decisions that could adversely affect the competent management of the CCRC.
Alternative anecdotal evidence suggests that residents are more concerned with the financial strength of the CCRC than they are with low fees, so residents often press for sound pricing even when management may fear market pressures.
When residents have filled cooperative apartment boards, they have tended to favor knowledgeable management and conservative finances over risky underpricing.
Any conflict of interest that residents may have in fee determinations seems likely to be less than the universal interest that executives have in maintaining high executive compensation packages across the full range of the economy and the full spectrum of industries.
Among the NaCCRA Model Laws is a minimal proposal for Governance Standards that discourage unjust discrimination against residents merely because they have accepted residence in a CCRC community. Such standards would be a first step toward respect for residents and the value that they can bring to CCRC governance if they are appropriately selected and listened to.
Such inclusion on Boards of Directors of “beneficiaries”—as residents are viewed by many in the not-for-profit sector of the senior housing and services industry—flies in the face of traditional not-for-profit thinking. Old-style “beneficiaries” were seen as helpless recipients of charity who should be grateful to their benefactors and not expect to have much control over their lives.
But that does not apply in any way to today’s market-rate CCRCs, whose residents are quite well-to-do and pay the full cost of the services they receive. This cost includes a sufficient profit margin over and above the actual cost of services provided, to cover capital funding needs and to provide a margin against adversity.
Given the current mindset of those steering the senior housing and services industry, the best response might be to convert CCRCs to resident ownership.
This would lead to transition challenges, though, since residents do die and since decision-making is challenging—if not impossible—for residents whose discernment is impaired by the ravages of age. These challenges can be addressed by cooperative ownership, initially in partnership with existing for-profit and not-for-profit owners. Cooperative ownership can resolve the governance issue positively.
NaCCRA’s Model Laws include such a cooperative conversion option together with an analytical discussion of the practicalities.
Click here to read NaCCRA’s Model CCRC Cooperative Conversion Act.
Click here to read a discussion of how such a conversion would work in practice.