The heartbreaking story of 89-year-old Arlene Kohen highlights the devastating impact that the bankruptcy of retirement homes can have on elderly residents. Kohen, a Long Island widow, sold her family home to pay the nearly $1 million entrance fee to live at the luxury senior community of Harborside in Port Washington. However, after the facility filed for bankruptcy multiple times, she was forced to move out, losing most of her life savings in the process.
Despite being promised a 75% refund of the entrance fee if she left the facility, Kohen’s family now expects to recover less than one-third of the $710,000 refund they were promised. The financial turmoil faced by Kohen is not an isolated incident, as the collapse of several continuing-care retirement communities (CCRCs) across the United States has left thousands of elderly residents in a similar predicament.
CCRCs are designed to allow seniors to age in place, with different levels of care available as needed. Residents pay steep upfront entrance fees, typically between $200,000 and $1 million, based on contracts that often include promises of partial refunds. However, in bankruptcy proceedings, these residents are often treated as unsecured creditors and receive only a fraction of their expected refunds.
The vulnerability of the CCRC business model to economic downturns and shifts in the housing market has become apparent in recent years. Many facilities rely on the sale of new entrance fees to fund operations and service debt, making them susceptible to financial instability during housing slumps. The closure of facilities like Harborside, Henry Ford Village, Unisen Senior Living, and Casey’s Pond has left residents facing uncertainty and financial loss.
While bankruptcies in the CCRC industry remain relatively rare, the consequences for those affected can be devastating. Elderly residents like Arlene Kohen are left in precarious situations, unsure of whether they will ever receive the refunds they were promised. The need for stronger consumer protections and oversight in the senior living industry has become increasingly apparent, as more and more residents face the risk of losing their homes and life savings due to the financial instability of retirement communities. Regulation of Continuing Care Retirement Communities (CCRCs) has been a topic of debate as the population ages and demand for senior housing increases. While some states have implemented regulations, the oversight remains uneven, leading to financial and emotional risks for residents.
Currently, more than 5% of the $36 billion in municipal bonds issued for CCRCs are in default. This alarming statistic has raised concerns about the lack of protections for seniors who could potentially lose their life savings and long-term care promises if a facility were to close unexpectedly.
Even in states like Florida, where CCRCs are treated as a specialty insurance product, closures like that of Unisen have still occurred, resulting in the eviction of residents. Efforts to strengthen protections have been met with resistance from industry advocates who argue that reforms would increase costs for seniors.
Katherine Pearson, a law professor at Pennsylvania State University’s Dickinson Law, highlighted the lack of expertise in many states when it comes to regulating CCRCs effectively. She emphasized the need for regulators to have the same level of expertise as insurance commissioners in order to properly oversee these facilities.
As the debate over CCRC regulation continues, it is clear that stronger oversight and protections are needed to ensure the well-being of seniors residing in these communities. Without adequate regulations in place, more residents could be at risk of losing their financial security and long-term care options.
