Skilled nursing facility owners are re-evaluating their plans in the face of an uncertain financial future. However, says Cambridge Realty Capital Chairman Jeffrey Davis, HUD financing has not changed and remains as accessible as ever to borrowers in the skilled nursing facility sector.
“Conventional lenders have begun ‘red flagging’ skilled nursing facilities,” says Davis. It is a trend that is happening across the US, not just in Illinois. The biggest factor influencing their decision is that the cost of delivering health care services is rising faster than inflation. In recent years, inflation has been rising approximately 2-4% annually, while the cost of healthcare is growing by about 3-5% each year.
Couple this with the fact that this sector is being strained by a shortage of skilled workers, and it’s easy to see why skilled nursing facility owners are feeling increasingly stressed. Some have responded by weaning these types of properties from their portfolios. Others are making deeper budget cuts or turning to managed Medicare and Medicaid to try to mitigate rising operating costs.
However, Davis encourages skilled nursing facility operators not to panic. HUD financing remains as accessible as ever. “HUD’s mission from the beginning has been to provide low-cost housing options for Americans,” says Davis. “That mission has not changed.”
HUD (“Housing and Urban Development”) is a government agency which was established in 1965 by the federal government. The Department of Housing and Urban Development Act, signed by President Lyndon Johnson, was enacted to help provide “fair and equal” access to housing in the United States.
The establishment of HUD was designed to carry into the future the spirit of providing housing for Americans that dates as far back as the post-war years. Then, the US government provided funding to build homes for war-effort workers and soldiers returning home from the war.
Today HUD is involved in a variety of funding efforts, including low-income housing development, rental assistance, supportive housing for seniors, housing rehabilitation, homelessness assistance and many other programs. The funding of skilled nursing facilities falls under HUD Section 232 and continues to be granted regularly throughout the United States.
Though the HUD system isn’t perfect, it still operates today with the same mission it began with when its predecessor built homes for war workers. “Its goal has been and remains to provide safe, affordable housing for all Americans, regardless of their financial status,” notes Davis.
Some skilled nursing facility owners have eschewed HUD loans due to a perception of an arduous application process and long wait times. These concerns do have some historical grounding, according to Davis. However, the introduction of HUD LEAN, a processing protocol which significantly streamlined the application process, has shortened wait times.
Still, the application process can be tedious, particularly for borrowers who have never applied for HUD funding before. However, working with an experienced HUD loan provider like Cambridge can streamline things considerably. Cambridge has more than 30 years of experience providing HUD loans. That experience goes a long way when it comes to advancing through red tape quickly, anticipating issues before they become a problem, and ultimately get the funding needed in a timely manner.
When you consider the appealing features of HUD funding, its low interest rate and its minimum credit score requirement (both of which are historically lower than those of conventional loans), HUD funding is a feasible and attractive alternative to conventional financing.