How Small-Home Senior Living Could Evolve In 2022 and Beyond

Small-home senior living has grown in recent years from a relatively niche product type to one that is garnering increased interest amid the Covid-19 pandemic.

These days, the small-home senior living sector includes everything from single-site residential properties to high-rise buildings with small-home wings on multiple floors. But the product type is still evolving, and the future of small-home senior living will likely include more intergenerational models — and new interest from investors as well as potentially some so-called “big-box” senior living providers.

That’s according to Siobhan Farvardin, senior designer and principal at architecture and design firm HKS; and Chuck Bongiovanni, CEO and co-founder of small-home company Majestic Residences. Bongiovanni is also the founder and former CEO of CarePatrol.

Small-home senior living communities haven’t been top of mind for investors or owners in recent years, with far more attention paid to billion-dollar, multiple-community portfolios. But with a disruptive pandemic in the foreground, there are signs that interest in small-home senior living is increasing, both from real estate investors and potential residents.

That is underscored by the fact that small homes can achieve profit margins similar to more traditional senior living communities, if operated well. The communities also typically carry higher staffing ratios while requiring fewer workers than their big-box counterparts.

“A lot of real estate investors are understanding, ‘Why should I buy a house and rent it out and make $400 a month, when I can … build a business out of it and make $10,000 to $15,000 per month?” Bongiovanni said during the recent Senior Housing News BUILD event in Chicago. “I think we’re turning the corner right now.”

Understanding the model

The biggest difference between small-home senior living and other senior housing communities is scale. While a standard independent or assisted living community might have anywhere between dozens and hundreds of units, a small-home community has far fewer.

Majestic Residences — which operates on a franchise model — tells franchisees they should expect to end up paying around $120,000 to lease and convert a small-home community to about $860,000 for a more substantial new build. And Farvardin said she usually sees one-story small-home community developments ending up in the range of about $170 per square foot, which increases to around $180 to $300 per square foot for a more vertical model. 

Profit margins on a small-home community vary, but Bongiovanni said margins of between 24% and 33% are attainable for Majestic Residences’ franchisees.

Yet another difference is how small homes performed relative to the rest of the industry with regard to infections and deaths early on in the pandemic.

A study of Green House and other small-home senior care communities released in early 2021 showed that the product type saw fewer Covid-19 cases and deaths as of the summer of 2020 than traditional nursing homes. While that comes with the caveat that Green House communities are often geared more toward skilled nursing residents — and that this was before the arrival of the Covid-19 vaccine or the delta variant — both Bongiovanni and Farvardin believe the product type has helped prevent the spread of Covid-19 among residents and staff.

CC Young is a Dallas-based continuing care retirement community that worked with HKS on a 10-story building with assisted living, memory support, skilled nursing, adult day and other services and amenities for residents. The building is unique in that it has small house-style layouts on certain floors, with up to 16 households per neighborhood.

The Vista at CC Young, courtesy HKS

The project started coming together years before the pandemic, and it was put to the test with the arrival of Covid-19 in 2020. But Farvardin said CC Young was able to leverage the small-house model to more easily and effectively protect residents amid the pandemic, and with greater flexibility to do so.

“The key component here is that a smaller group of residents are living together, in the 12 to 16 [resident] range, as opposed to what you would see in a big-box, which could be in the 30 [resident] range,” Farvardin said at BUILD.

Bongiovanni echoed that experience, and said that although Majestic’s first five homes opened during the early days of the Covid-19 pandemic, they were all full within eight weeks. He believes much of that has to do with the way Majestic Residences’ franchise homes operate, with staffing ratios of one caregiver per four or five residents and technology geared toward residents’ individual needs.

“Covid has increased [demand],” he added. “The families in our homes see it as more controlled, because we have more caregivers per resident.”

Staffing is another area where small homes can excel. The need to employ fewer workers under the Majestic Residences model has resulted in deeper connections with residents and a more tightly knit community culture, according to Bongiovanni.

“The caregivers get to know the residents a lot more, and have a deeper relationship with them,” he added. “They get to know the other caregivers that are working with them … and they don’t want to let [them] down.”

About a quarter of Majestic’s homes currently have live-in caregivers. Hourly wages for Majestic Residences caregivers range from about $12 to as much as $18.50.

To date, Majestic Residences has awarded 32 franchises, with six franchise communities open and more on the way — including in the Dominican Republic, where the company is involved in converting a school into a 20-bed small-home community.

“We’re growing quite a bit in a very short period of time because of the franchise model and the power of branding,” Bongiovanni said.

Small-home evolution

While the pandemic has made the future more uncertain, both Bongiovanni and Farvardin can see some possible paths for small-home senior living in the future.

Farvardin believes that current trends in senior housing will push more small-home communities toward intergenerational models. In particular, current real estate projects in the multifamily and office worlds might serve as a model for senior living companies wanting to break the mold.

“They’re now getting more complicated and diverse in more mixed-use settings,” Farvardin said.

At CC Young, there is a playroom for younger children and a technology-focused room for teenagers — and Farvardin said “that’s just the tip of the iceberg” in what she thinks the industry can do in the years to come.

“If we can do that more in a grander mixed-use setting, I think that’d be really provocative,” she added.

Farvardin also thinks small-homes represent one avenue for more sustainable building practices in senior housing.

“How do we make these buildings something that you’re not going to demo in 10 years?” Farvardin said. “By having a smaller household, you can take down one wing and renovate it or reinvent it quickly.”

Technology is another arena where the small-home model is evolving. Today, Majestic Residences employs a suite of technology that includes specially formulated aromas meant to evoke good feelings and emotions, robotic pets, sensors that can detect incontinence and virtual reality headsets.

Looking ahead, Bongiovanni believes that it’s only a matter of time before a big-box senior living operator enters the small-home landscape, particularly as many of them try to reach younger seniors.

“That younger senior 70 to 75 does not want to be with the … person who’s 86,” he said. “There almost has to be some evolution where some of the big-boxes will build some of the smaller homes to take care of those with high acuity.”

And in the meantime, he is positioning Majestic to potentially partner with such a company when the time comes.

“I see a partnership, perhaps, with a big-box community [where we] would show them how to do it,” he said.

How Small-Home Senior Living Could Evolve In 2022 and Beyond

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