Economics and Emergencies Are Pressuring and Perplexing Age-Restricted Condominium Communities

The marketing brochure for an “age-restricted” condominium development shows a group of smiling, active seniors obviously enjoying the amenities in a community designed for and limited to people their age. There is no hint of bitter battles like the one that erupted at a Florida condominium when the board moved to evict owners who had won custody of their young granddaughter, because children were not allowed to reside permanently in the “55 and over” community.Media reports predictably cast the board as the heavy in this conflict, and the plight of the owners and their granddaughter (whose mother was a drug addict) certainly merited sympathy. But the board’s enforcement of the age restriction wasn’t mean-spirited or even unduly rigid – it was necessary to preserve the Fair Housing exemption that allows “age-restricted” communities to constitute themselves as such by restricting the number of younger residents or prohibiting them entirely.The Housing for Older Persons Act, enacted in 1995, allows two types of age-restricted communities. The most common (because it is the least restrictive) requires 80 percent of the units to be occupied by at least one individual who is 55 or older; the second type requires that all units must be occupied by residents who are at least 62. Some local communities and some condominium documents are even more restrictive, requiring all occupants, and not just one of them, to meet the age requirement in 55 and older developments, or requiring more than 80 percent of the units (and sometimes 100 percent of them) to be occupied by age-qualified residents. 

Economic Pressures

Those restrictions, while still embraced enthusiastically by residents in many communities, have become problematic for some. As the recession has decimated the employment market, many adult children who lost their jobs, their homes, or both, and college graduates unable to find jobs have moved in with parents living in communities where their children cannot legally reside. Residents object to violations of the “adults-only” rules, association boards (or municipal officials) move to enforce the restrictions, and litigation ensues.“People lose their homes because they won’t lose their children,” one owner fighting an eviction move by her condominium board, observed.The weak economy has created other challenges for these communities. Restricting the age of eligible occupants who can reside in a community eliminates nearly two-thirds of the buyers who might want to purchase available units. That may not be a problem ― or at least not a fatal one ─ when the housing market is booming, but it can be a serious problem when conditions are less robust, as they have been for the past several years.New projects begun in better times stalled as the recession took hold, leaving developers with units they were unable to sell. Those developers and existing owners, similarly hard-pressed to find buyers for units they wanted to sell, have sought to lift the age restrictions in their communities. 

Changing the Rules

That isn’t easy to do. A super majority of owners must agree to change the condominium documents, and the local government must approve a change in the terms of the permit granted for the development. Neither owners nor local officials agree readily to those requests. Owners view proposals to lift age restrictions as a violation of the “adults only” promise that led them to purchase homes in the community. Local officials, who embraced senior housing because it promises the financial benefits of new development (new property tax revenue) without the burden on local resources (mainly schools) created by housing for families with children, are unwilling to open a door they thought they had closed.Condominium boards often find themselves caught in the middle, as owners who want to maintain the age restrictions threaten to sue if they are lifted, and owners who can’t find buyers for their units threaten to sue if they are not.Even in communities that have dodged the direct financial impact of the downturn (limited marketability) and its collateral damage (adult children returning to previously empty nests), boards must cope with emergency situations: Grandparents, like those in the example cited earlier, who are forced to assume responsibility for young children; the younger than 55 occupant who no longer meets the occupancy requirement when her older-than-55 spouse dies; the elderly owner in a community where all residents must be 62 or older, who needs full-time care from a younger child or aide.The emergency situations can be easier to address than the economic pressures. Regulations adopted by the Department of Housing and Urban Development provide one possible solution to the ineligible caregiver. They specify that caregivers would not be counted as non-qualified residents under the federal law, so the community would not be at risk of losing its Fair Housing exemption. If the municipality’s rules are stricter, the owner’s caregiver might be subject to an eviction order, and if the terms of the permit require it, the association might be obligated to initiate it. However, the owner in need of care could argue, with some likelihood of success, that a waiver of the age restrictions is required as an accommodation under the Fair Housing law. 

Hardship Provisions

Condominium associations (and developers) can avoid at least some of these conflicts by taking advantage of the flexibility the federal rules allow and even encourage. Although HUD’s regulations allow 55-and-older communities to bar children entirely, agency guidance advises “some flexibility where the exemption would not be destroyed by that flexibility.”Hardship provisions can soften strict requirements enough to prevent them from being unreasonable. For example, an association rule requiring one occupant to meet the 55-or-older age restriction might also specify that if a spouse dies, the non-eligible survivor will have a 120 days or 180 days to leave. This provision might also extend the temporary age waiver for a survivor who will meet the age requirement within a year after his/her spouse dies. Similarly, a provision making it clear that the definition of “occupant” does not include anyone who resides in the community for fewer than 120 days (or 120 consecutive days) in a year would accommodate extended stays by children or grandchildren. Associations should also consider special provisions for adult children who inherit age-restricted units and want to occupy or rent them instead of selling them.Hardship provisions can address special needs and emergencies, but they can’t offset the economic problems that are troubling many communities and threatening the financial viability of some of them. The economic downturn and weak housing market are aptly blamed for some of those problems, but others reflect what may be overly optimistic assumptions about the nature and size of the market for age-restricted housing. 

CHAPA’s Warnings

Initial projections for this market seemed open-ended as the first wave of the nation’s 78 million baby boomers approached retirement age in the early 2000s. And the first projects coming on line were hugely successful, encouraging other developers to follow. Local policies favoring age-targeted developments over other housing alternatives added momentum to that trend. But demand in some communities has fallen short of projections – a risk the Citizens Housing and Planning Agency (CHAPA) identified in a 2005 report.The report tallied more than 150 age-restricted projects in place or under construction at the time in 93 communities, projected to add more than 10,000 units to the market, with another 14,000 units in 172 developments in the planning stages. Even recognizing that not all of those planned developments would go forward, the report noted, “the sheer volume of new units coming onto the market in the next 24-36 months means there will be much greater competition [in the future]…. developments that are not well-located, well-designed and well-priced are unlikely to succeed,” the report cautioned, “and even the most attractive units may experience anemic sales if they are the third or fourth entry into an already saturated market….The extraordinary number of units proposed, and their concentration, exceeds what is likely to be absorbed in the near term, even under the most optimistic assumptions,” the report added.The report did not anticipate the additional strains the economic downturn would create. But it did question the assumption that the outsized baby-boomer population will create equally outsized demand for age-targeted housing. Among other constraints, not all seniors can afford the cost of these amenity-rich communities, and some (nearly 90 percent in one survey) will prefer to age in place in the homes they currently own, if that is an option.CHAPA estimated eight years ago that fewer than 10 percent of home buyers 55 and older had purchased in age-restricted communities in Massachusetts. Even if that percentage doubled – an unlikely prospect at best, the report noted – total demand, including resales, would amount to “fewer than 3,500 units per year” by 2010.This doesn’t mean that the market for age-restricted housing has disappeared or is likely to; many projects have succeeded in the past and others will succeed in the future. Aging baby-boomers will continue to be attracted by the lifestyle and amenities these communities offer. But developers must look beyond that generic appeal and analyze carefully the demand for any project they are contemplating, considering not just the number of 55 and over adults in the market, but the number who are likely to move into the development and the number of competing projects – existing or planned ― in the area. It is those numbers, not the theoretical appeal of age-targeted housing that will determine how a specific project in a particular community is likely to fare.Local officials considering requests to ease or eliminate age restrictions in existing developments should undertake the same rigorous analysis of current and future demand for age-targeted housing in their community, recognizing that while senior housing may produce revenue undiminished by pressure on schools and other resources, vacant units produce no revenue at all.Residents of existing communities should be equally realistic. Their dismay at seeing the adult-only community they expected transformed into something else is understandable, but their concerns that the market value of their homes will be compromised by the change may be misplaced. In fact, the reverse may be true. Maintaining the age restrictions may reduce values not only by limiting the pool of prospective buyers to those who meet the age requirement , but also by discouraging otherwise age-eligible buyers who may avoid adults-only communities that would preclude them from helping their children should they need assistance. In some developments, the choice owners face may be between changing the character of their community or risking its failure.