I am a strong supporter of continuing care retirement communities (CCRCs), also called life plan communities, especially those that are well-managed, financially stable, and prioritize residents and staff. Compared with the many challenges and uncertainties of aging at home—especially when mobility or cognitive abilities decline—CCRCs offer peace of mind for residents and their families, along with social and wellness benefits. In the past couple of years I’ve visited nearly 80 CCRCs. Most residents I spoke with are happy with their decision and often say they wish they had moved sooner. Adult children also appreciate knowing their parents live where care and support will be provided as needs change.
I also believe CCRCs can help address the mounting long-term care challenges our country faces: a rapidly aging population, a shortage of caregivers (both unpaid and paid), and increasing pressure on federal and state budgets. To realize that potential, the CCRC industry will need to adapt—finding cost-effective ways to serve the middle market, meeting the lifestyle expectations of upcoming retirees, and building strong trust. The last point is critical, because if not addressed it could undermine confidence in CCRCs.
Shoring up entry fee reserves
About three-quarters of CCRCs require an entry fee. The primary purpose of that fee is to offset some or all future care costs a resident may need. Paying an entry fee signals trust that the community will provide housing and a continuum of care. Many providers offer refundable entry fee contracts, where a portion of the entry fee is returned to the resident or the resident’s estate when the residence is vacated due to a move or death.
Refundable contracts typically carry a higher entry fee than non-refundable or amortizing contracts. Residents often assume the difference is held in reserves to pay future refunds, but that is not always the case. In some communities those funds are used to secure development debt, finance expansion, or cover operating expenses instead of being earmarked for refunds.
So where do refunds come from when a unit is vacated? Frequently the community waits until the unit is reoccupied before issuing the refund, meaning the next resident’s entry fee effectively funds the payout. When demand is strong, this turnaround can be quick; in other cases it may take years. That lag can create public relations problems and emotional strain for families, even if the residency contract discloses the policy. Disclosure alone does not make it good policy.
Not having dedicated entry fee reserves raises other concerns. Suppose a CCRC changes pricing or offers new contract types and a future occupant pays a lower entry fee than the departing resident did. Who covers that shortfall? Without reserves, such discrepancies can create financial stress. Similarly, if a community runs into serious financial trouble or files for bankruptcy—a rare but possible event—residents may be surprised to learn that entry fee refunds may not be legally protected.
Finding a reasonable middle ground
I’m not advocating immediate refunds the moment a unit is vacated. Allowing a reasonable window helps ease financial pressure on the community and can protect residents who remain. That said, communities should set aside reserves to guarantee refunds after a defined time period even if the unit remains unoccupied. Residents and their families should not bear all marketing risk. Some states have already stepped in: Connecticut, for example, limits the maximum time to three years, which is long but better than an indefinite wait. Florida is considering similar measures.
Many CCRCs have voluntarily adopted shorter time limits, often from a few months up to a year—timeframes most people would find reasonable. Having a clear, finite period establishes better expectations for residents and families while balancing a community’s need for financial stability.
A marketing advantage
From an operator’s perspective, allocating more to reserves may seem difficult, because funds must come from somewhere. Raising fees risks competitiveness, and cutting operating expenses can be unpopular. However, communities already charge higher fees for refundable contracts precisely to cover that eventual refund obligation. Realigning how those funds are used does not necessarily force deep cuts in services or staff compensation.
Moreover, offering a fair and transparent refund timeline can be a powerful marketing differentiator. A community that manages reserves well and guarantees refunds within a reasonable period becomes more appealing to prospective residents. Improving public trust and occupancy can reduce financial strain: increasing occupancy from, say, 90 percent to 95 percent and above makes the refund model far more manageable. While better reserve policy alone won’t achieve that jump, combined with sound operations and resident-focused practices, it can contribute meaningfully to stronger occupancy and reputation.