Phoenix Is Becoming the Epicenter of the Group Home Movement

As Phoenix continues in the growth of the group home movement, it has created opportunities for local real estate agents. 

The statistics are compelling.

The number of citizens in the United States aged 90-and-older tripled to 1.9 million from 1980 to 2010. Furthermore, that number is expected to increase to more than 7.6 million over the next 30 years, according to a recent report from the U.S. Census Bureau.

Phoenix and other warm-weather cities are at the epicenter of that trend.

The old school way of looking at this, for real estate agents, is that more housing will start to flood the market as the elderly, unable to take care of themselves, abandon their conventional homes for nursing homes. That means plenty of opportunities for the listing agent. However, that’s only half of the story. Changes are also taking place in the assisted living industry, especially in Phoenix, that could have massive implications for real estate agents.

Developers of nursing homes can’t keep up with the demand for beds. Secondly, the elderly are increasingly deciding that it can be less costly, and they can enjoy a better quality of life if they transition from a conventional house to what is called a “Group Home.” According to Maricopa County, “a Group Home serves ten or fewer minors/children, disabled (antiquated ordinance language reads ‘handicapped’) or elderly persons living together as a single housekeeping unit in a long term (at least one year), family-like environment in which staff persons provide on-site care for the residents.”

Maricopa County is home to more Group Homes, 2000, than any other county in the United States.

And the growth in demand for Group Home accommodations is not slowing down. Larry L. Miller, a Phoenix real estate developer, has managed three such homes in the Phoenix area for almost a decade. “We frequently have a waiting list to get into our Group Homes,” said Miller. “When a bed opens, it is filled quickly. This demand is being driven by individuals and families, as well as healthcare-related companies and insurance companies. The latter is significant because it means that Group Homes, as long as they meet the licensing requirements, are an equal alternative to nursing homes in the eyes of the healthcare industry.”

Miller added that this demand has attracted substantial entrepreneurial activity in Phoenix, where individual developers purchase a conventional house and convert it into a Group Home. The construction cost is modest compared to the increased value of the home once it is licensed.

One example of this is Tim Hurst, a Phoenix developer who, over the past few years, has purchased more than a dozen conventional homes, renovating some of them into Group Homes and then selling them to operators, such as Miller.

With 50 years of construction and construction management experience in residential, commercial, and industrial projects, Hurst has the process down to a science. And, being in his early 80s himself, this issue is also very personal. To that end, he has embraced the opportunity to visit with residents. “Transitioning into a Group Home is such a life-changing experience for these residents, as opposed to moving into a nursing home or conventional assisted living facility, where they are institutionalized,” he said.

Given this compelling trend, Hurst, whose company, Hurst Construction, has been building homes in Phoenix for three decades, began looking for a way to fuel his passion. Hurst turned to an old friend, and former Phoenix resident, Peter J. Burns III. Burns is widely respected as the co-founder, along with Brent Richardson, of the nation’s first College of Entrepreneurship at Grand Canyon University. “The spark behind the college was ignited … by Peter Burns, a self-made millionaire (and teacher of) entrepreneur education classes at Arizona State University’s Barrett Honors College,” according to the Phoenix Business Journal.

“I knew if anyone could find a way to secure the necessary capital to satisfy this insatiable demand, it would be Peter, whose entrepreneurial instincts are second to none,” said Hurst. Burns has not disappointed, securing the capital necessary to merge with Miller’s business, and making Hurst a partner.

Called Horizon Care Homes, the new entity has already purchased ten homes in the Phoenix market. Most of these homes will be Behavioral Group Homes, outfitted to serve the physically and/or mentally disabled community.  One of the homes will form the foundation of a new division of the company, called Luxury Group Homes, which will be comprised of mansions, or ‘white elephants’ as Burns calls them. The first mansion acquired is being retrofitted into a Luxury Assisted Living Group Home and offered, with executive chefs and other luxuries, to well-heeled clientele, who are used to a certain standard of living, and can afford an out-of-pocket expense of upwards of $15,000 a month to live in this luxurious setting.

The opportunity for the real estate agent community is real.

“We are not the only ones in the marketplace,” said Burns, who has hedge funds clamoring to back his business. “There is a growing opportunity for agents to sell their inventory to developers, like our group, and earn a commission from a different kind of buyer.”

Such sales will happen more quickly if the property has the following characteristics, according to Hurst who is on the front line of evaluating such properties:

  • Motivated seller
  • Single floor, or elevator
  • Five or more bedrooms

Even without those qualities, the good news is that more selling opportunities are on the horizon.

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