The Growing and Changing Business of “Impact Investing” in Private Group Homes for Disabled Adults

Throughout history, families with disabled children have grappled with how to provide adequate housing for their mentally disabled children as these children, and their caretakers, grow older. Often, families turn to the state and federal governments for funding assistance, like Medicaid, and/or state-funded housing options. Over time, the government’s approach to providing said housing assistance has changed. Asylums, which were funded by most state housing boards in the early part of the twentieth century, were initially popular for providing cheap housing and hospital-like care to anyone who seemed mentally inapt in any way.

But this is now considered an antiquated approach to housing individuals whose mental disabilities simply went misunderstood for most of the twentieth century. Indeed, asylum’s and mental institutions are not the place for all disabled adults lacking normal cognitive skills; there is a recognizable range of mental disability. As a result of this shift in the public’s understanding and the state’s funding, mental institutions around the country, which traditionally housed thousands of adults with a variety of disabilities, closed their doors—putting mentally disabled patients without guardians on the streets, to fend for themselves or find other adult-care housing.

It was at this time in the last quarter of the twentieth century that the business of privately owned, adult-care housing was born. The state began to offer grants and tax breaks to wealthy individuals who partnered with not-for-profits and privately funded more diversified, and arguably reputable, housing facilities.  By happenstance, or as a result of state institutions closing, many disabled individuals who were wards of the State needed a place to go. As these disabled people grow older their family members pass, caretakers move on, and they are left with a variety of responsibilities. Who will distribute their medications, oversee their daily activities, and get them from point A to point B?

Notably, these new, privately funded facilities could handle all of these tasks. The federal government and state governments alike began working to fund more and more of these privately owned projects. Funding went into building group homes in established residential communities and apartment complexes in urban areas.  This allowed disabled adults to feel immersed in their surrounding communities and have ownership over their day-to-day lives, while still having the necessary medical and advisory attention that their disabilities demanded.

These facilities took on a plethora of titles (live-in facility, group-homes, adult-care communities, board-and-care homes, and others). Unfortunately, the number of varying titles for these facilities does not currently correlate with the number of available spots to house adults with conditions ranging from Downs Syndrome and Autism to Phelan-McDermid Syndrome (a rare genetic disorder that effects an individual’s ability to mentally develop beyond an infant age). Instead, waiting lists for these facilities continue to grow.  In Illinois, for example, the wait list for disabled adults to get placed in a private housing facility exceeded 8,300 adults in 2016. One might ask, “Why aren’t there more options?” The answer: the business is much harder than it seems.

Early on businessmen and women thought investing in these housing options for disabled adults was the perfect opportunity for impact investing. Here was a group of people who required little in terms of the finer housing amenities in life—many were coming from hospitals and asylums where even having their own room seemed like a big deal. Moreover, many lacked the ability, and money, to speak out against any mistreatments or neglect they faced from staff caretakers at the group-homes. And, initial government support was easy to find since state and federal governments were glad to rid themselves of the costs and stigmas associated with state-run mental institutions. Investors could partner with not-for-profit organizations and develop housing communities while simultaneously earning a profit through structured-loan agreements with the state. It seemed to be a win for disabled adults who needed housing, a win for the state who needed a place to house them, and a win for investors looking to turn a profit.

However, group homes present both internal and external challenges that continue to discourage many states from giving grant money to investors and many investors from taking on the task of managing these homes. The disabled, along with their families and advocacy groups, have fought back against horrific scenes of neglect, malnutrition, and mistreatment. Businessmen and women, and government agencies alike, have encountered staffing crises’, lawsuits, funding issues, and pushback from surrounding communities.

Indeed, substituting large hospital-like institutions and hundreds of staff members with group homes comprised of one-on-one care and very few residents, is the perfect recipe for neglected, disabled adults to hide in plain view. It is harder for state appointed caseworkers to visit all housing locations and ensure the safety of residents; it is difficult for private companies, using government money, to find and pay qualified staff for care positions that require difficult and less-than-glamorous work; and it is a never-ending battle to find a balance between resident autonomy and the necessary resident supervision. Indeed, the advent of the privately owned, adult group home has proven to be a blessing that brings with it several obstacles. There have been a slew of court cases across the country in recent years about staff members of group homes forgetting residents in cars in 115 degree heat, neglecting residents, mistreating residents, and killing residents. Time and again private companies, individually run homes, and the government have been found liable.

The group home and disabled community facilities also face challenges from communities around the country who disfavor disabled adults living amongst them. Many citizens, disillusioned by the mental state of their soon-to-be neighbors, are concerned with local emergency services being overused and overworked by these “more needy” residents. Community members are also concerned that property value in the area will go down since disabled adults can neither give back to the local community through public service and taxes nor presumably take care of their properties in the same manner (an easily challenged argument, but an argument just the same). For these reasons and others, many more cautious investors are choosing to proceed with caution.

Still, one thing is for certain. The privately owned group home setting is the prominent twenty-first century alternative for housing adults with disabilities. And the demand far exceeds the supply. Amongst recent lawsuits and newfound advocacy for the disabled community, a result of the 2016 presidential election, funding for group home agencies and members of the disabled community is rising in a number of states. Still other states, like Virginia, face serious problems amidst rumors of an overhaul to Medicaid and Medicare funding following President Trump’s first few days in office. Investors are clenching their teeth, waiting to see if this market will be their friend or their foe in 2017.

All in all, private investors are likely to stay in this business, but face more accountability from families, politicians, and generally concerned citizens. Businessmen and women are capitalizing on this market, but not without ever-increasing pushback from communities and continued supervision by the courts. It will be interesting to watch how their profit margins, and the care for disabled adults in these homes, is effected by the recent forthcoming decisions of the Trump administration. For now, it is refreshing to know that our legal system is working to protect the disabled, new sources of funding are surfacing for people in need, and many disabled adults continue to find their sense of individualism by living in these privately funded homes.

Anna-Bryce Flowe is a second year law student at Wake Forest University School of Law, where she is also a member of the Wake Forest Moot Court Board, Wake Forest AAJ Trial Team and Honor Council Treasurer. She holds a degree in Politics from New York University and worked for AT&T’s Premier Client Group, Corporate Sales before starting law school. Her brother, Crosby Flowe, has a rare genetic disorder and lives in a state funded group home for disabled adults in South Carolina. His condition and lack of housing opportunities in that state reaching as far back as 1990 were the basis for this article. Upon graduation, she plans to practice as a civil litigator, with an emphasis on business and international law.