Small-home elder housing has developed in recent years from a very niche product type to one that is receiving growing attention during the Covid-19 epidemic.

These days, the small-home senior living industry comprises anything from single-site residential properties to high-rise complexes with small-home wings on numerous levels. But the product type is still changing, and the future of small-home senior living will certainly involve more intergenerational models — and fresh interest from investors as well as maybe some so-called “big-box” senior living providers.

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

Small-home senior living communities haven’t been front of mind for investors or owners in recent years, with considerably more attention devoted to billion-dollar, multiple-community portfolios. But with a disruptive pandemic in the forefront, there are hints that interest in small-home elder living is rising, both from real estate investors and potential inhabitants.

That is highlighted by the fact that tiny homes may reach profit margins equivalent to more typical senior care communities if handled effectively. The communities also often have greater staffing ratios despite requiring fewer personnel than their big-box competitors.

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

Understanding the model

The largest distinction between small-home senior living and other senior housing communities is scale. While a normal independent or assisted living community could include anywhere between dozens and hundreds of units, a small-home community has considerably fewer.

Majestic Residences — which operates on a franchise basis — informs franchisees they could anticipate to end up paying roughly $120,000 to lease and convert a small-home community to about $860,000 for a more substantial new construction. And Farvardin said she normally sees one-story small-home community developments ending up in the region of approximately $170 per square foot, which climbs to roughly $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 percent and 33 percent are realistic for Majestic Residences’ franchisees.

Yet another distinction is how tiny households performed relative to the rest of the sector with relation to infections and mortality early on in the epidemic.

A study of Green House and other small-home elder care communities released in early 2021 found that the product type witnessed fewer Covid-19 instances and deaths as of the summer of 2020 than typical nursing facilities. 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 home that partnered with HKS on a 10-story facility offering assisted living, memory support, skilled nursing, adult day, and other services and facilities for residents. The building is unique in that it features tiny house-style layouts on some levels, with up to 16 residents per neighborhood.

The idea started coming together years before the pandemic, and it was put to the test with the advent of Covid-19 in 2020. But Farvardin said CC Young was able to harness the small-house concept to more simply and effectively safeguard inhabitants despite the epidemic, and with greater flexibility to do so.

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

Bongiovanni repeated that experience and added that although Majestic’s first five residences opened during the early days of the Covid-19 outbreak, they were all occupied within eight weeks. He feels much of it has to do with the way Majestic Residences’ franchise houses function, with staffing ratios of one caregiver per four or five residents and technology-oriented toward residents’ unique requirements.

“Covid has raised [demand],” he noted. “The families in our homes feel it as more managed because we have more caretakers per resident.”

Staffing is another area where tiny homes might succeed. The requirement to hire fewer personnel under the Majestic Residences model has resulted in closer interactions with residents and a more tightly knit community culture, according to Bongiovanni.

“The caretakers get to know the residents a lot more, and have a closer relationship with them,” he continued. “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 houses presently have live-in carers. Hourly earnings for Majestic Residences caregivers range from $12 to as high as $18.50.

So far, Majestic Residences has granted 32 franchises, with six franchise communities operating and more on the way — including in the Dominican Republic, where the business is involved in transforming a school into a 20-bed small-home community.

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

Small-home evolution

While the epidemic has made the future more unpredictable, both Bongiovanni and Farvardin can envision some plausible avenues for small-home elder living in the future.

Farvardin believes that current trends in elder living will push more small-home communities toward intergenerational models. For example, contemporary real estate initiatives in the multifamily and office industries may serve as a model for senior housing enterprises looking to break the pattern.

“They’re now growing more intricate and diversified in more mixed-use settings,” Farvardin added.

At CC Young, there is a playground for younger children and a technology-focused space for teens — and Farvardin said: “that’s only the tip of the iceberg” in what she thinks the business can accomplish in the years to come. “If we can do it more in a bigger mixed-use context, I think that’d be incredibly provocative,” she continued.

Farvardin also feels small homes provide one option for more sustainable building techniques in senior living.

“How can we make these structures something that you’re not going to demo in 10 years?” Farvardin stated. “By having a smaller family, you can tear down one wing and restore it or reimagine it quickly.”

Technology is another field where the small-home paradigm is expanding. Today, Majestic Residences incorporates a package of technology that includes carefully created smells meant to elicit happy sentiments and emotions, robotic pets, sensors that can detect incontinence, and virtual reality headsets.

Looking ahead, Bongiovanni feels that it’s just a matter of time until a big-box senior housing operator joins the small-home environment, particularly since many of them aim to target younger seniors.

“That younger senior 70 to 75 does not want to be with the … guy who’s 86,” he added. “There almost has to be some evolution where some of the big-boxes would create some of the smaller houses to take care of folks with high acuity.”

And in the interim, he is preparing Majestic to possibly collaborate with such a firm when the time comes. “I envisage a relationship, potentially, with a big-box community [where we] would show them how to do it,” he added.