Understanding HUD Loans for Senior Living Communities

As senior living communities navigate the current financial climate, it is essential to understand every financing option available, as well as which partners are ready to assist them. To help explain how owners can capitalize on HUD-insured loan solutions, we sat down with VIUM Capital’s Director, Adam Walter, to discuss HUD-insured loans and the options available to senior living communities. 
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What Solutions Does VIUM Provide Through HUD-insured Financing?

Adam:

As we look at the industry, owner/operators have been impacted by a variety of economic factors over the last couple of years. Whether that be inflation, staffing availability, and the interest rate environment for the last 12 to 18 months, the market has been challenging. VIUM has leaned into the US Department of Housing & Urban Development’s mortgage insurance program, which provides HUD-approved lenders like VIUM Capital to provide permanent financing for senior living providers. This enables owner/operators an avenue to create more certainty around one of the largest expense line items they have outside of direct care costs (ie: payroll and benefits); annual debt service payments.

HUD-insured loans provide superior pricing and terms by way of relatively long maturities, lower fixed rates, and non-recourse financing for owner/operators in the space. What that does is allow them to reduce interest rate and refinance risk so they can focus on efficiently managing the operational metrics that they control within their building. We have found it to be a really good source that provides more certainty in terms of long term financing solutions when there is other uncertainty in the market.

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Why is VIUM the Best Option for HUD-insured Loan Solutions?

Adam:

VIUM takes a step back to evaluate the overall timing of the process. When our clients are seeking to acquire a senior living asset, we have found that a bridge to HUD solution is efficient due to the bridge loan allowing the operator to execute their business plan over a 12 to 24 month period to stabilize operations before going to HUD. We provide direct bank bridge financing through our joint-venture partnership, so we serve as a one-stop shop for clients. This ultimately allows highly efficient acquisition or recapitalization financing, and then stabilization through that shorter term period. We then payoff our bridge loan via the HUD-insured loan we originate. 

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What Sets VIUM Apart from Other Capital Providers?

Adam:

At our core, VIUM’s culture and our people are fantastic and we believe that is a huge differentiator. Our clients genuinely appreciate the relationships we're able to build with them, especially as we then serve as their advocate as they work towards executing their business strategy. We seek to find the best financing solutions and keep the interests of our clients in the forefront. 

It's also noteworthy that we have an extensive amount of experience within our VIUM leadership team (over 75 years) in working with HUD programs and other types of financing solutions. That allows us to tailor the financing solution to achieve the short and long-term goals of our clients. Our deep experience also allows us to leverage our relationships with state and national associations, as well as various advocacy groups. We are in tune with the decision makers at those organizations so that we are relaying the best regulatory advice to our clients and how that might impact any one transaction.

And of course, we’re arguably the only lender exclusively serving the seniors housing and healthcare commercial real estate space that has a direct bank-bridge and HUD platform. That is our secret sauce.

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How VIUM Provides Unbiased Service

Adam:

Our commitment to being a leading HUD senior living lender is born out of the consistency of that program. There are many other variables in the market that are impacting day to day operations, and despite the challenges of the last three to five years, we found that this program continues to be one of the, if not the best, long term non-recourse permanent financing structure out there.

We pride ourselves on understanding the nuances of the HUD 232 healthcare program, and being able to effectively get from engagement to the closing table in an efficient manner, which allows our clients to focus on what they do best; caring for their residents. Let us focus on what we do best in executing on their behalf. I think that's the alignment and a reason we have found HUD to be an appealing program. 

As far as being agnostic in terms of financing solutions, the HUD 232 healthcare program is a great option, but it may not be the best fit for all of our clients. If there's a near-term sale that an organization is looking to effectuate, then they may not want to tie the asset up in long-term permanent financing (although HUD loans can be paid off at any time, and are even assumable). In this scenario, there are other structures that we can evaluate, particularly for seniors housing, by way of government sponsored enterprise financing like Fannie Mae and Freddie Mac, or even Life Company execution. We also have a licensed municipal advisory subsidiary that can provide structuring of tax-exempt bond solutions.

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HUD-insured Loan Eligibility Considerations

Adam:

The HUD 232 healthcare program has important eligibility considerations for assisted living and memory care properties, in that they have at least twenty beds and are geared towards seniors 62 years and older who need assistance with activities of daily living (ADLs). Additionally, it’s important to consider these senior living communities’ need to be licensed or regulated by the state in which the facilities are located, meet bathroom to resident ratio requirements, provide areas for central dining (or food preparation when food is supplied), and provide continuous protective oversight. There are also restrictions within independent living where if you have a community that provides a continuum of care, you cannot have more than 25% of total units be independent living although there are strategies to pursue HUD financing in these instances that VIUM has successfully navigated for clients. Those are some of the formal eligibility items that are important to consider, particularly for senior living providers.
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VIUM’s Forecast for 2025

Adam:

We are excited about the prospects of 2025, particularly within the senior living industry. Independent living, assisted living, and memory care providers have had a little longer runway toward stabilization coming out of the pandemic. These operators have been able to effectively implement multi-year rent increases and manage expenses through the use of improved technology solutions. Occupancy trends were slower to rebound in 2022 to 2023, but there has been continued improvement coming into Q4 of 2024 that we believe will continue into 2025. This is important for senior living providers as many HUD loans were constrained by debt service. The ability to stabilize cash flows will allow borrowers to achieve target debt service metrics providing a clear path to successfully execute on refinancing and recapitalization strategies. Combined with the reduction in short and long-term interest rates in 2024, we believe this will provide strong underlying fundamentals and generate more transaction activity as we move into 2025.

Understanding HUD loans is critical for senior living communities seeking stability and long-term financial solutions. Leveraging HUD-insured loans through trusted partners like VIUM offers a pathway to certainty, with flexible terms and non-recourse financing that helps communities focus on their operational goals. Whether you're considering acquisition, refinancing, or new construction, VIUM’s expertise ensures you have the support needed to navigate these decisions effectively. Ready to explore financial solutions? Contact VIUM today and discover how HUD-insured loan solutions can elevate your senior living community’s financial future.