It is very difficult for an apartment complex that serves low-income senior citizens to break even without some form of a subsidy or incentive. These can come in many flavors. Layering the subsidies on top of each other can result in a complex that is breaking even with a relatively low average rent.
Those subsidies can include low-income tax credit programs (such as the 4% tax credit), grants from Community Development Block Grants or HOME Investment Partnership Program, tax abatements from local governments and taxing districts, discounted or donated land, and tax credit “bonuses” for locating the project in a hard-to-serve area (known as “130% areas” because of the multiplier applied). Not every project can obtain every one of these subsidies, but every subsidy used not only lowers the break-even rent, but also expands the number of elderly people who can take advantage of the apartments to live in dignity.
For example, say the average rent of an apartment in a building restricted to senior citizens—just enough to pay for the development, construction, and continued operation of the building.—is $1345. There is a market for such an apartment, but many seniors have a limited, fixed income, and are priced out of it. Financing the building with tax exempt bonds limits it to tenants below a certain income threshold, but would reduce the hypothetical break-even rent to $737, making it more attractive for more people. Adding 20% of the financing from state and federal grants brings the average rent down to $622; getting a tax abatement from the local government can bring it down to $539; and locating the project in a hard-to-serve 130% area can bring that even lower, to $488. Not only does such a low rent mean the building will have little trouble filling up, but it also means a wider range of people can be served.