A new U.S. government report warns that a number of “continuing care retirement communities” are facing financial problems, while regulation of these facilities is spotty. Continuing-care communities offer an entire continuum of care – from independent housing to assisted living to round-the-clock nursing services – in a single facility, with the goal of allowing residents to age in place.

The solvency of these communities is critical to the residents. To pay the required entrance fee, which can be hundreds of thousands of dollars, many older Americans sell their home, which is often their primary asset. Residents also typically pay a monthly service fee. While few such communities have gone bankrupt, financial problems at a community could cause residents to lose their entrance fee if the community goes under, or to face sharply higher service fees if it doesn’t.

A new report from the U.S. Government Accountability Office notes that challenging economic times and a poor real estate market have weakened the financial condition of many communities. That’s because the communities rely on high occupancy levels to remain solvent. A bad economy is causing more Americans to stay in their homes longer. And with low real estate prices, many people can’t sell their homes in order to pay an entrance fee.

On the other hand, some communities are benefitting from strong demand from aging baby boomers, along with cheaper labor costs.

The communities are primarily regulated by the states rather than by the federal government. However, according to the report, only 38 states actively regulate them. There is no regulation in Alabama, Alaska, Colorado, Hawaii, Mississippi, Montana, Nebraska, Nevada, North Dakota, South Dakota, Utah, or West Virginia.

You can read the full report at http://www.gao.gov/new.items/d10611.pdf.