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The Empowerment Challenge

Some cultures extol their elderly citizens.  China is famous for what is known as “filial piety” though that is said to be changing now as values of modern prosperity begin to supplant traditional loyalties there. 

Other cultures go to the opposite extreme.  One of the most well-known stories about the Inuit Eskimos is the myth that when people are too old to remain self-sufficient they are abandoned to perish alone on an ice floe.  The moral of the myth is that such an honorable end allows the older person to retain the dignity of being remembered as a productive, functioning person.  Whether the custom was ever fact, it is not practiced today.

American culture is no less confusing in its approach to old age.  On the one hand we celebrate centenarians who are athletically active or who continue to publish and participate in the public dialogue.  On the other hand, not long ago we had the proposal that Comedian Will Farrell might appear in a movie evoking humor by mocking former Ronald Reagan during his descent into Alzheimer’s.

For most older people living in the wider community, it’s of little consequence whether those they meet admire them for their age or discount them as doddering.  But it becomes a matter of much greater significance for those older people who choose to live in an age-segregated congregate living community.  Those who choose an Over 55 Active Living Community are apt to be seen as vibrant and engaged though such communities tend to age over the years as caregivers’ cars replace resident cars in the driveways of the homes.  Still, residents of such communities are not disparaged because of age merely because of their choice of residence.

That neutrality concerning the discernment and wisdom of the elderly shifts with congregate living settings that include care as a central feature of the residential product offering.  Individual home ownership is common in Active Living Communities but rare in Continuing Care Retirement Communities (CCRCs) and rarer still in Assisted Living facilities.  As the word “community” gives way to “facility” the nature of the residential expectation is telegraphed in the name, and merely changing the descriptor, say, to Life Plan Community, does not in itself change the reality.  As care needs increase the tendency toward dependent institutionalization and regimentation under the codes of managers becomes more pronounced.  This can be demeaning for an older person with an active mind.

This change in the way people are viewed from respected, contributing members of the community to dependent, doddering oldsters who need to be humored but not heeded, becomes particularly disturbing in communities that require a buy in.  While an Adult Living Community home can be bought and brings with it a say in the governance of the community, that is not true in other forms of congregate housing.  With almost no exceptions an entry fee provides no ownership and no say in the decisions concerning the community.

This need not be so.  Tax exempt organizations can have members and the members of a tax exempt CCRC, for instance, could be the residents.  That is not how the founding executives view it, however.   They are not eager to share authority so most not-for-profit CCRCs are organized with no members or with a single corporate member and all ownership decisions are made by the executives with the support of the board.  This disconnect of investment from ownership carries with it a loss of accountability which is central to most business activity.

Similarly, corporate CCRC organizations can give residents an equity ownership in the form of shares proportionate to the value of their entry fee investments.   There are some cooperatively organized senior living developments, though not many.

Why not?  Who knows?  Maybe it’s because many CCRCs were first charitable homes for the aged which transmogrified into luxury CCRCs for the affluent when the IRS released Revenue Ruling 72-124.   Maybe it’s because operators like the unquestioned license given them by the New Jersey Supreme Court ruling in Onderdonk v. Presbyterian Homes of NJ [85 N.J. 171 (1981) 425 A.2d 1057].  It’s likely that corporate operators looking for profit opportunities saw the anomaly that a CCRC operator could sell a residential unit for a sum equating to a substantial share of its market value but still continue to own the unit fully after the “sale.”  Whatever the reason, the outcome is that most residents are subordinate in such housing enterprises to nonresident directors and compensated executives.

In the right hand column, we consider some responses to this tradition of disempowerment which is sustained by the conventional wisdom that residents cannot be trusted to act for the good of the enterprise since their remaining lifespans are expected to be short.


What Is To Be Done?

Increasingly residents are pressing for state laws to mandate that at least one resident be allowed to sit as a full voting member of the board of directors.  The common practice of excluding residents from boards is indicative of the bias toward residents that renders a resident, no matter how well qualified, as ineligible to participate in corporate decision making.

The idea of a Bill of Rights is popular with senior housing residents though there is little evidence that such Rights Declarations change the substance of the subordination of residents to the decisions of the provider executives.  Click on this paragraph for more material on such Rights.

Some CCRCs, notably Terwillinger Plaza in Portland, OR and Horizon House in Seattle, WA include a considerable resident representation on the boards but that is the exception rather than the rule.  We know of no not-for-profit senior housing providers that have made residents the members in the enterprise in the way that not-for-profit social clubs have members. The absence of such membership belies the social responsibility claimed so piously by these organizations in their mission statements.

Cooperative ownership lifted Manhattan real estate and it might do the same for senior housing.  It can offer a developer a path to realize gains while empowering residents in their homes.  The National Continuing Care Residents Association (NaCCRA) has a model law that would facilitate the conversion of existing senior housing properties into residential ownership.  The cooperative model is preferable to condominium ownership since it allows a structuring that facilitates the turnover of a residential unit upon the death of the occupant.

Click here for the NaCCRA Cooperative Conversion Model Law

Click here for an explanatory paper about Cooperative Conversion

Hybrid models are also possible in which the residential units might be owned cooperatively while the common areas and services could be organized as a tax exempt not-for-profit entity under IRS Revenue Ruling 72-124.

Click here for the Text of IRS Revenue Ruling 72-124




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