Can HUD 223(f) Loans Be Used for Senior Housing Communities?
If you're interested in acquiring or refinancing a senior housing community, can you use a HUD 223(f) loan to do so? Maybe — but assisted living facilities won't qualify.
HUD 223(f) Loans and Senior Housing Communities
If you're interested in acquiring or refinancing a senior housing community, can you use a HUD 223(f) loan to do so? Well, it depends. Senior, or age-restricted communities, are defined by HUD as any development intended for residents 62 years and older. And, while age-restricted communities are eligible for HUD 223(f) loans, some of them might offer services that make them ineligible.
Specifically, projects that are not eligible for HUD 223(f) financing include:
Skilled nursing facilities
Memory care facilities (including Alzheimer's/Dementia care)
Developments with communal dining areas
What are the eligibility requirements for HUD 223(f) loans?
Eligible Borrowers for HUD 223(f) Loans: If you're an investor or developer who wants to use a HUD 223(f) loan to acquire or refinance a multifamily property, you'll need to make sure you that your borrowing entity has the correct legal structure. In general, HUD 223(f) loans require that the borrower is a single asset, special purpose entity (SPE), which can either be a for profit or a non-profit entity.
Eligible Properties for HUD 223(f) Loans: HUD 223(f) Loans Permit Nearly All Property Types. In general, to be eligible for HUD 223(f) financing, a property:
- Must have 5+ residential units
- Must have complete kitchens and bathrooms for each unit
- Can be row, walkup, detached, semi-detached, or elevator-type rental or cooperative housing
- Can be student housing, but multiple rents cannot be derived from one unit and rents need to be similar to comparable multifamily properties
- Can be market-rate, affordable, or rental assisted/subsidized (i.e. Section 8, Section 202)
- Cannot be an assisted living, skilled nursing, or memory care property (though independent living facilities for seniors are allowed)
- Must have all construction and major rehabilitation finished three or more years before beginning the HUD loan application process
Additional Hud Requirements and Items For Consideration:
- Loans greater than $75 million are subject to stricter DSCR constraints and more conservative leverage
- HUD 223(f) multifamily financing can be used with LIHTCs (Low-Income Housing Tax Credits)
- HUD 223(f) loans can be used for refinancing or purchasing Section 202, Section 236, and Section 8 funded properties
- A PCNA (Project Capital Needs Assessment) must be completed every 10 years
- Davis-Bacon prevailing wage rules are not applicable to repairs
To learn even more about the basics of submitting a file for consideration, visit the Apply Page of our website.
What types of properties are eligible for HUD 223(f) loans?
Eligible Properties for HUD 223(f) Loans: HUD 223(f) Loans Permit Nearly All Property Types
In general, to be eligible for HUD 223(f) financing, a property:
- Must have 5+ residential units
- Must have complete kitchens and bathrooms for each unit
- Can be row, walkup, detached, semi-detached, or elevator-type rental or cooperative housing
- Can be student housing, but multiple rents cannot be derived from one unit and rents need to be similar to comparable multifamily properties
- Can be market-rate, affordable, or rental assisted/subsidized (i.e. Section 8, Section 202)
- Cannot be an assisted living, skilled nursing, or memory care property (though independent living facilities for seniors are allowed)
- Must have all construction and major rehabilitation finished three or more years before beginning the HUD loan application process
Are senior housing communities eligible for HUD 223(f) loans?
Senior, or age-restricted communities, are defined by HUD as any development intended for residents 62 years and older. And, while age-restricted communities are eligible for HUD 223(f) loans, some of them might offer services that make them ineligible. Specifically, projects that are not eligible for HUD 223(f) financing include:
- Assisted living facilities
- Skilled nursing facilities
- Memory care facilities (including Alzheimer's/Dementia care)
- Developments with communal dining areas
Only independent living facilities, in which seniors do not get any assistance from the project itself, are eligible for HUD 223(f) financing. Meal services can be offered, but group dining facilities are not permitted.
Many Developers are Using HUD 232 and HUD 232/223(f) Loans to Finance Senior Communities. In general, investors or developers interested in acquiring or refinancing assisted living or skilled nursing facilities with a HUD multifamily loan turn to the HUD 232 and HUD 232/223(f) programs, which are specifically designed for the financing of senior properties. While HUD 232 loans permit the construction of new properties, HUD 232/223(f) loans are intended for refinancing and acquisition. These loans also permit the financing of independent living facilities. However, these loans typically offer slightly lower LTV allowances than a comparable HUD 223(f) loan.
What are the benefits of using HUD 223(f) loans for senior housing communities?
HUD 223(f) loans offer a number of benefits for senior housing communities, including:
- 35-year terms, allowing for lower monthly payments
- No third-party reports required
- No DSCR requirements
- Eligible for independent living facilities
For more information on HUD 223(f) loans, please visit https://www.hud223f.loans/loan-facts/.
What are the risks associated with HUD 223(f) loans for senior housing communities?
The risks associated with HUD 223(f) loans for senior housing communities depend on the type of senior housing community. Projects that are not eligible for HUD 223(f) financing include: assisted living facilities, skilled nursing facilities, memory care facilities (including Alzheimer's/Dementia care), and developments with communal dining areas. Only independent living facilities, in which seniors do not get any assistance from the project itself, are eligible for HUD 223(f) financing. Meal services can be offered, but group dining facilities are not permitted.
In addition, HUD 232/223(f) loans are intended for refinancing and acquisition, and typically offer slightly lower LTV allowances than a comparable HUD 223(f) loan. (Source, Source)
Only independent living facilities, in which seniors do not get any assistance from the project itself, are eligible for HUD 223(f) financing. Meal services can be offered, but group dining facilities are not permitted.
Many Developers are Using HUD 232 and HUD 232/223(f) Loans to Finance Senior Communities
In general, investors or developers interested in acquiring or refinancing assisted living or skilled nursing facilities with a HUD multifamily loan turn to the HUD 232 and HUD 232/223(f) programs, which are specifically designed for the financing of senior properties. While HUD 232 loans permit the construction of new properties, HUD 232/223(f) loans are intended for refinancing and acquisition. These loans also permit the financing of independent living facilities. However, these loans typically offer slightly lower LTV allowances than a comparable HUD 223(f) loan.
To learn more about HUD 223(f) loans, simply fill out the form below. One of our HUD lending experts will be in touch.