Fair Housing laws are pretty sweeping. When evaluating tenants, you can't discriminate based on gender, age, race, religion, familial status, or virtually any other demographic-based factor, and you can't consider things like English proficiency, disability, mental illness, or even some crimes in evaluating renter applications.
You also can't steer clients toward housing arrangements just because you think they'd fit in. You can't even market your rental toward certain groups of renters, be they gender-based, age-based or otherwise.
As a landlord, it can sort of feel like walking on eggshells -- especially if you're looking to invest in senior housing. You can't evaluate applications based on age? You can't turn away potential tenants with kids, students, or young bachelors? You can't even market your property toward the age group you're looking to reach?
Unless you can qualify for the senior housing exemption, that's the scenario you face.
What are senior housing exemptions?
Technically a section of the Housing for Older Persons Act of 1995 (HOPA), senior housing exemptions excuse qualifying housing communities from adhering to the Fair Housing Act -- at least some parts of it. It's designed to help alleviate the housing shortage today's seniors face, particularly on accessible properties.
If your community qualifies for a senior housing exemption, then you'll legally be able to market based on age and familial status. You can also turn down applicants who don't meet your age-based requirements for the home or community (i.e., young singles or couples or families with minor children).
How do I qualify for the senior housing exemption?
To start, you need to have what the Department of Housing and Urban Development (HUD) considers a "housing community." This is "any dwelling or group of dwelling units governed by a common set of rules, regulations, or restrictions." Think condo associations, co-ops, HOA-governed neighborhoods, mobile home parks, etc.
If you meet this initial qualification, there are two types of senior housing exemptions you might be able to leverage: the 62 and older exemption or the 55 and older exemption. Here's how each exemption works:
- 62 and older: All occupants of the community's units must be 62 or older. The property must be solely intended to serve tenants of this age.
- 55 and older: At least one person 55 or older must live in 80% or more of the units. You also must "publish and adhere to policies and procedures that demonstrate an intent to provide housing for persons 55 years or older," according to HUD.
That last part might be a little confusing, but according to HUD, you just need to cover your intent to rent to seniors in your community rules and lease provisions, use appropriate senior-related advertising/marketing, and have age verification procedures in place.
A couple of caveats
Of course, qualifying for the senior housing exemption doesn't exempt you from other tenets of the Fair Housing Act. You still can't discriminate against other protected classes (such as race, color, gender, religion, or national origin) in your tenant screening processes.
Furthermore, housing protections vary from state to state. California's, for example, are more stringent than most. Make sure to study up on your state's individual laws before investing in senior housing.
Top senior housing markets
Not sure where you should invest in senior housing? You might want to look toward America's retirement hubs.
Here's where U.S. News and World Report says 2020 retirees are heading:
- Harrisburg, Pennsylvania
- El Paso, Texas
- Allentown, Pennsylvania
- Orlando, Florida
- Chattanooga, Tennessee
- Portland, Oregon
- Melbourne, Florida
- Pittsburgh, Pennsylvania
- Tampa, Florida
- Fort Wayne, Indiana
Wherever you buy, make sure your property falls in line with HOPA requirements so you can properly market and advertise it. Then thoroughly screen your tenants to make sure they qualify.
Want to invest in senior housing in other ways? Try these five high-potential senior living REITs instead.