Case Study · North Carolina · Assisted Living & Memory Care · HUD 232
Assisted Living Feasibility Study, North Carolina — A HUD 232 Worked Case
This is how our independent feasibility study company and senior housing feasibility consultant team analyzed a new-build assisted living and memory care community underwritten to a HUD-FHA Section 232 permanent takeout, from age-qualified demand and capture through the debt-service coverage the program must document. It is an anonymized, composite worked example of the methodology — not a specific client or address — set in a high-growth suburban submarket on the edge of a major North Carolina Piedmont metro, where a certificate-of-need gate makes the supply read decisive.
A 90-unit care community on a growing Piedmont edge.
A sponsor came to our feasibility study company with a ground-up assisted living and memory care community and a two-stage capital plan: a regional-bank construction loan to build and fill, then a HUD-FHA Section 232 permanent takeout to lock in low-cost, non-recourse leverage once the community stabilized. Both lenders needed the projected cash flow independently tested before they would commit. The subject is a 90-unit community — 62 assisted living and 28 memory care units — on roughly seven acres in a high-growth suburban submarket on the edge of one of North Carolina's large Piedmont metros, where the 75-and-over population is expanding well above the state average.
Because assisted living is a going concern rather than a passive real-estate play, the lender's question is not “what is the dirt worth” but “can this specific community fill to a needs-based demand base and cover this specific debt” — the collateral is the operating business, its license, and its assembled workforce, not just the building.11 North Carolina adds a gate most states do not: assisted living beds are licensed as adult care home beds and are covered by one of the nation's strictest certificate-of-need regimes, so new supply is rationed by a county need determination rather than set freely by the market.14 Our scope was the independent demand, penetration, capture, competition, and debt-service analysis that supports both the construction credit and the HUD takeout. The figures here are a composite of the assisted living and memory care engagements we see in high-growth North Carolina submarkets, not a single named deal.
Age-qualified penetration and capture, not a rooftop count.
Senior-housing demand starts with a qualified population, not a population. The read is built on the age-75-and-over and age-80-and-over cohorts in the primary market area, screened for the income to afford private-pay rates, then netted against a certificate-of-need-limited supply.
The most common demand error in this asset class is applying a national or metro penetration rate to a market area without qualifying the elderly population by both age and income. Across the top 140 US markets, penetration averaged roughly 10.2 percent of the 80-plus population in 2023, and that cohort is projected to roughly double nationally, from about 13 million in 2020 to about 27 million by 2040.4 In the subject's primary market area — a drive-time band around the site — the 80-plus population runs near 8,600 and is growing about 4 percent a year, with a broader 75-plus feeder cohort near 14,200. Applying a market-level penetration in the roughly 10-to-11-percent range to that age base implies market-supportable inventory near 900 assisted living and memory care units. Against the roughly 550 competitive units standing or planned in the area, the market is materially under-penetrated, and once the private-pay income screen is applied to the gap, net unmet demand is on the order of 270 units. A 90-unit community captures roughly a third of that gap — a defensible capture rather than an aspirational one.
| Demand driver | Basis | Supported figure |
|---|---|---|
| PMA population 80+ | ~8,600 residents, growing ~4%/yr | Core age cohort |
| PMA population 75+ | ~14,200 residents (broader feeder cohort) | Rising qualified base |
| Market-supportable inventory | ~10.5% penetration of 80+ (≈10.2% top-140 avg)4 | ≈ 900 AL/MC units |
| Existing + planned competitive supply | Comp-set survey; CON-limited pipeline14 | ≈ 550 units (~6.4% penetration) |
| Income-qualified net unmet demand | Private-pay screen on the penetration gap | ≈ 270 units |
| Subject capture | 90-unit program / ~33% of net unmet demand | 90 units (81 at ~90% occ.) |
Penetration logic grounded in the top-140-market average and Census age projections; see source 4. Competitive supply is limited by North Carolina's adult-care-home certificate-of-need regime; see source 14. Figures are illustrative of the engagement type.
An under-penetrated market behind a certificate-of-need gate.
Six communities anchor the competitive set, but only part of their inventory competes directly for the same private-pay assisted living and memory care resident — and a certificate-of-need gate keeps the pipeline thin. Households age faster than beds are permitted.
| Competitor | Segment | AL/MC units | Distance | Read |
|---|---|---|---|---|
| Community A | AL + memory care (mature) | 96 | 2.1 mi | Stabilized ~92%; MC waitlist |
| Community B | Assisted living only | 74 | 3.4 mi | Dated product, no dedicated MC |
| Community C | AL + memory care (newer) | 110 | 4.6 mi | Still leasing (~85%) |
| Community D | IL + AL (entry-fee) | 48 | 5.2 mi | Different buyer; AL a minority |
| Community E | Standalone memory care | 40 | 3.9 mi | Full; specialized MC |
| Community F | AL + memory care (value) | 88 | 6.1 mi | Medicaid-blend, lower rate tier |
Competitive set surveyed for the engagement; anonymized. Announced and CON-approved supply was scanned, not just the standing set, consistent with institutional senior-housing practice. Roughly 456 units stand today, with ~90 units of approved pipeline, for ~550 competitive units.
The competitive read is favorable on both quality and quantity. The nearest mature community runs at stabilized occupancy with a memory-care waitlist, the value-tier and Medicaid-blend product serves a different resident than the subject's private-pay program, and the entry-fee campus competes for an independent-living buyer more than an acuity-driven assisted living one. Crucially, new supply cannot simply arrive to split the market: North Carolina rations adult care home beds through a certificate-of-need need determination, so a study must scan the CON-approved pipeline rather than assume open entry, and it cannot quietly overstate capture with beds the trailing data cannot yet see.14 That gate cuts both ways — it constrains the subject too — which is why the community's own bed count is underwritten against a county need determination as a gating deliverable, not merely a market forecast. Nationally the same picture holds: units under construction fell to roughly 17,000 by the third quarter of 2025, the fewest since 2012, and year-over-year inventory growth hit a record-low 0.4 percent, so the subject fills a genuine gap rather than adding to a glut.2
North Carolina: a supply-constrained sector in a fast-growing state.
The national senior-housing backdrop is a tailwind, and North Carolina layers strong in-migration and a certificate-of-need supply gate on top of it — tempered by rising construction and property-insurance cost.
The sector rides a structural demographic tailwind while supply has collapsed. NIC MAP Vision reported Primary Market senior-housing occupancy of 89.5 percent in the first quarter of 2026, the nineteenth consecutive quarterly gain and up from a pandemic trough of 77.8 percent in June 2021, with assisted living at 87.9 percent.1 Against record-low construction, the market needs roughly 806,000 additional units by 2030 simply to hold current penetration as the first baby boomers turn 80.3 Rate power has followed: same-store asking-rent growth ran about 4.3 percent in the third quarter of 2025, average asking rent exceeded $5,650 per month, and the Genworth/CareScout national median assisted living cost reached $6,200 per month in the 2025 survey — and in this asset class that base rate carries acuity-based care fees on top.15
North Carolina sharpens the case. The state reached an estimated 11,197,968 residents as of July 1, 2025, up 1.3 percent in a year and third nationally in growth rate, on net domestic in-migration of roughly 84,000, and the large Piedmont metros are among the fastest-growing in the country.13 Decisively for this asset class, North Carolina runs one of the strictest, broadest certificate-of-need regimes in the country under N.C. Gen. Stat. Chapter 131E, Article 9, covering nursing-home and adult-care-home beds, which holds oversupply risk low for licensed care even where multifamily is digesting a record delivery cycle.14 Two offsets are real: development cost has risen to roughly $317,400 per unit, and property insurance is climbing statewide after Hurricane Helene proved inland flood exposure, so both belong in the pro forma as live line items.1015 A recent tailwind cuts the other way: North Carolina's corporate income tax fell to 2.0 percent on January 1, 2026, on a legislated path toward zero.15
Why the submarket supports a private-pay community.
The age cohort, household wealth, and adult-child decision-maker base all point the same direction, and the site converts that demand into a fillable community.
Assisted living is bought by two decision-makers at once: the 80-plus resident who needs care, and, very often, the adult child in the 50-to-65 band who chooses and pays for the community. The subject submarket carries both — a fast-growing 80-plus base and a large, higher-income working-age population whose parents are aging into need — which is exactly the profile a private-pay program at a $6,000-to-$8,000-a-month blended rate requires. Median household wealth in the drive-time area sits comfortably above the level at which private-pay penetration strengthens, so the income screen does not gut the demand base the way it would in a lower-wealth county.4 Trailing Census counts also understate the captive base in a submarket growing near 4 percent a year, a distortion a careful feasibility consultant corrects for rather than extrapolates.13
The site does the rest. The roughly seven-acre parcel sits within a short drive of a hospital and medical-office cluster and an established retail node, on a road network the adult-child visitor and the emergency responder both reach easily — the access profile that shortens lease-up and supports referral relationships. The building program devotes a secured wing and a protected courtyard to the 28 memory care units, underwritten to memory-care economics rather than blended assisted living assumptions, because memory care carries tighter staffing ratios, roughly one caregiver to five or six residents against one to eight in assisted living, and a different revenue and margin profile.7
Bank construction, then a HUD 232 permanent takeout.
Total project cost lands at $31.5 million. A regional bank funds the build and lease-up at 65 percent loan-to-cost against a 35 percent equity injection; once the community stabilizes, a HUD-FHA Section 232 permanent loan takes out the bank and locks in 35-year, non-recourse debt.
| Cost component | Amount |
|---|---|
| Land (~7-acre suburban parcel) | $2.60M |
| Site work & utilities | $2.30M |
| Building shell & core (~86,000 sf) | $18.90M |
| FF&E & secured memory-care systems | $2.60M |
| Soft costs (A&E, permits, CON, legal) | $2.10M |
| Financing, FHA/MIP & closing costs | $1.20M |
| Operating-deficit / lease-up reserve | $1.80M |
| Total project cost | $31.50M |
All-in development cost of ~$350,000 per unit sits above the ~$317,400-per-unit national average, consistent with a memory-care-heavy program in a high-cost suburban submarket. See source 10.
| Item | Figure |
|---|---|
| Bank construction loan (65% LTC) | $20.48M |
| Sponsor equity injection (35%) | $11.02M |
| Construction phase | ~24-month term, interest reserve, floating, recourse |
| HUD 232 permanent takeout | $26.40M |
| Permanent term / amortization | 35-year fully amortizing, non-recourse |
| Illustrative permanent rate | ~6.0% |
| Permanent LTV / DSCR | ~65% LTV (inside the ~80% cap) / 1.45x |
| Annual permanent debt service | ≈ $1.81M |
HUD-FHA Section 232 (LEAN) parameters: 1.45x minimum DSCR, up to ~80% LTV, 35-year fully amortizing and non-recourse. Loan sized to the most restrictive of LTV and DSCR. See sources 9 and 12.
The two-stage structure is the standard senior-housing path for a ground-up deal: the regional bank carries construction and lease-up risk with an interest reserve and recourse, and HUD Section 232/223(f) provides the low-cost, non-recourse permanent debt once the community is stabilized.9 The permanent loan is sized to the most restrictive of the roughly 80 percent loan-to-value ceiling and the 1.45x coverage minimum, and here coverage binds first: at a 1.45x DSCR the loan solves to about $26.4 million, an implied loan-to-value near 65 percent, comfortably inside HUD's ceiling.912 At $26.4 million the HUD takeout repays the $20.5 million construction loan and returns roughly $5.9 million of the original equity, leaving about $5.1 million of sponsor capital in a deal that is now financed with 35-year, fixed-rate, non-recourse debt. The study exists to support exactly that coverage — tested against an independent read of demand and a going-concern appraisal that allocates value among real estate, FF&E, and business-enterprise value, rather than the sponsor's own projection.11
Feasible and bankable, on coverage the HUD credit can document.
The stabilized model builds resident revenue from two care segments, nets an expense structure in which labor dominates, and carries the coverage to the HUD 232 floor across a graded fill-up ramp.
| Line | Basis | Amount |
|---|---|---|
| Assisted living revenue | 62 units × ~90% occ. × ~$6,450/mo5 | ≈ $4.32M |
| Memory care revenue | 28 units × ~90% occ. × ~$8,300/mo5 | ≈ $2.51M |
| Second-occupant, community & ancillary fees | Fee layer above base room rate | ≈ $0.07M |
| Total stabilized revenue | AL + MC + ancillary | ≈ $6.90M |
| Operating expenses | Labor ~55% of opex; ~62% of revenue67 | ≈ ($4.28M) |
| Net operating income (NOI) | Revenue less operating expense | ≈ $2.62M |
Blended rates sit at and modestly above the Genworth/CareScout 2025 medians for a new, high-acuity suburban product; memory care runs ~20-30% above assisted living. Operating-expense ratio is carried at the upper-middle of the 55-70% band for a memory-care-weighted community. See sources 5, 6, and 7.
| Year | Stage | NOI | Debt-service basis | DSCR |
|---|---|---|---|---|
| Year 1 | Lease-up (from opening) | ~$0.6M | Bank construction, interest reserve | Pre-stabilized |
| Year 2 | Approaching stabilization | ~$2.08M | HUD 232 perm ~$1.81M | 1.15 |
| Year 3 | Stabilized | ~$2.62M | HUD 232 perm ~$1.81M | 1.45 |
DSCR computed as NOI divided by the period debt-service obligation. Year 1 lease-up is carried by the bank construction loan's interest reserve; the HUD permanent loan is placed at stabilization. See sources 8 and 9.
The stabilized 1.45x coverage is the figure the HUD credit documents, and it sits exactly at the Section 232 program minimum for market-rate assisted living.9 The ramp to get there is deliberately graded, because lease-up is where senior-housing pro formas most often fail review: industry practice models 18 to 30 months to stabilization, the average assisted living length of stay is near 22 months, and nearly 40 percent of residents leave within the first year, so a community must re-lease a large share of its units every year just to hold occupancy.8 Year 1 is intentionally pre-stabilized — the community is filling from opening, and the bank construction loan's interest reserve carries it — which is precisely why the permanent takeout is not measured until the fill-up reaches its supportable occupancy. By Year 2 the community covers the permanent debt at 1.15x; by Year 3 it reaches the 1.45x stabilized standard. Breakeven occupancy sits near 80 percent, a cushion below the roughly 90 percent stabilized level and inside the at-or-below-85-percent breakeven lenders prefer.8
On the equity side, the $11.0 million injection is partly returned at the HUD takeout, which repays construction and hands back roughly $5.9 million, leaving about $5.1 million in a deal then carrying stabilized levered cash flow of roughly $0.8 million a year and growing as the fixed 35-year debt service amortizes against a rate structure that escalates with acuity and market rent.1 The exit is valued on a going-concern basis, not a leased-fee cap rate: capitalizing a Year-10 stabilized NOI at a going-concern overall rate near the 6.2 percent the market applied to seniors housing in late 2025 — adjusted for the community's age and memory-care weighting — supports a strong terminal value net of the outstanding HUD balance.16 Blending the partial equity return, stabilized distributions, and the going-concern exit, and carrying a full lease-up-risk premium, the result is an illustrative levered equity IRR of about 16 percent over a 10-year hold.
Verdict: financially feasible and bankable. On independently derived penetration and capture, a graded fill-up to a stabilized 1.45x DSCR, and a ~16% levered equity IRR, the projections support the bank construction loan and the HUD 232 permanent takeout.
Independent penetration, labor, going-concern, and DSCR stress.
The engagement was scoped the way HUD and a bank credit committee read it. As an independent feasibility consultant, our role is to test the sponsor's projection against the market, not to restate it — the value of the deliverable is precisely that it carries no stake in the outcome. We derived demand from an age-and-income-qualified population and a defensible penetration and capture, netted against a certificate-of-need-limited competitive set, rather than applying a national rate to a rooftop count. Revenue was modeled on an acuity-based rate structure with memory care underwritten to memory-care economics, and the operating model was built from a position-by-position labor schedule at documented local wages — the single largest and most error-prone line, near 55 percent of operating expense at a direct-care median wage of $17.36 an hour.6
The coverage analysis was then stress-tested. We ran the debt-service coverage against a slower fill-up, a softer stabilized occupancy, and an agency-labor re-escalation — the variables a new care community is most exposed to — to confirm the HUD credit still holds when lease-up or labor moves against it.8 Two scope boundaries are worth stating plainly: as the feasibility consultant we reference, but do not perform, the going-concern appraisal, the Project Capital Needs Assessment, and the Phase I environmental site assessment that complete a Section 232 package, and we build the market study to the NCHMA content standards and HUD MAP form requirements the reviewer applies.912 That combination — independent penetration and capture, a position-level labor model, a going-concern basis, and a stressed DSCR — is what lets both lenders rely on the file.
Underwriting a North Carolina assisted living community for a HUD 232 loan? Start with the feasibility study.
Feasibility Study Company prepares independent assisted living and memory care feasibility studies for HUD-FHA Section 232, bank construction, agency Seniors Housing, and SBA credits, built to the coverage and content standard your lender must document. A methodology briefing walks through the penetration, capture, labor, and DSCR analysis behind a case like this one, calibrated to your submarket and program.
Request a methodology briefingData sources and dates.
The deal figures are illustrative of the engagement type; the market data that grounds each dimension is real and sourced, drawn from our standing North Carolina, Assisted Living & Memory Care, and Conventional & Institutional analyses and the primary authorities they cite.
- NIC and NIC MAP Vision press release (April 23, 2026): Q1 2026 Primary Market senior housing occupancy 89.5 percent, 19th consecutive quarterly gain, up from a pandemic all-occupancy trough of 77.8 percent in June 2021; independent living above 91 percent, assisted living 87.9 percent; occupied units a record 637,000; same-store asking-rent growth ~4.3 percent (AL 4.4 percent) in Q3 2025, average asking rent above $5,650 per month.
- NIC MAP Vision construction and inventory data (2025–2026): units under construction ~17,000 by Q3 2025 (fewest since 2012); quarterly starts ~1,076 units in Q1 2025 (lowest since 2009); year-over-year inventory growth a record-low 0.4 percent in Q1 2026.
- NIC MAP Vision Senior Housing Outlook (June 26, 2024): roughly 549,000 additional units needed by 2028 and 806,000 by 2030 to hold current penetration; a 550,000-unit shortfall and $275 billion investment shortage; development "must accelerate to more than 3.5 times the current pace."
- Plante Moran (2024), citing Census projections: penetration averaged roughly 10.2 percent of the 80+ population across the top 140 markets in 2023; the U.S. 80+ population projected to roughly double from about 13 million (2020) to about 27 million (2040); the qualified-demand method screening the elderly population by both age (75+/80+) and private-pay income.
- Genworth and CareScout Cost of Care Survey: 2024 survey (released March 2025) national median assisted living cost $5,900 per month ($70,800 per year), up 10 percent; 2025 survey national median $6,200 per month ($74,400 per year); base room rate plus acuity-based care and level-of-care fees.
- PHI, Direct Care Workers in the United States: Key Facts 2025 (June 2025; BLS OEWS analysis): direct-care median wage $17.36 per hour in 2024, turnover routinely cited at 40 to 80 percent; labor roughly 55 percent of assisted living and memory care operating expense.
- Janover Pro and MMCG (2025): stabilized assisted living and memory care operating-expense ratios 55–70 percent of revenue versus 35–45 percent for stabilized multifamily; memory-care staffing ratios of roughly one caregiver per five or six residents versus one per eight in assisted living, and the associated margin compression.
- NCAL and Senior Housing News operator survey (2025): average assisted living length of stay near 22 months; roughly 18–28 months in AL and 18 months to three years in memory care; nearly 40 percent of AL residents leave within the first year; industry lease-up practice of 18 to 30 months to stabilization; lender breakeven-occupancy preference at or below roughly 85 percent.
- U.S. Department of Housing and Urban Development, Handbook 4232.1 and Section 232 program materials (Office of Residential Care Facilities, LEAN): 1.45x minimum DSCR for market-rate assisted living and skilled care, up to ~80 percent LTV, 35-year fully amortizing and non-recourse (232/223(f)); state licensure with continuous protective oversight; FHA/MAP-approved lender and healthcare underwriter; third-party report set (market study, going-concern appraisal, PCNA, Phase I ESA); independent living generally capped at 25 percent of units.
- ASHA / State of Seniors Housing (via McKnight's) and The Weitz Company ASHA construction-cost briefs (early 2026): total development cost ~$317,400 per unit ($333 per square foot), up 17.8 percent since 2020; assisted living construction $280–$452 per square foot by tier.
- Appraisal Institute, The Appraisal of Real Estate: the going-concern and business-enterprise-value method allocating the total assets of the business among real property, tangible personal property (FF&E), and intangible/business value; going-concern value can far exceed the underlying real estate, and evaporates if a facility goes dark.
- NCHMA Model Content Standards (Version 3.1, September 2025) and HUD MAP form set (HUD-92273, HUD-92274, HUD-92264): the methodology and form baseline reviewers apply; a loan is sized to the most restrictive of loan-to-value, debt-service coverage, and debt yield, per the firm's Conventional & Institutional analysis.
- U.S. Census Bureau, Vintage 2025 Population Estimates, and NC Office of State Budget and Management / State Demographer: North Carolina population 11,197,968 as of July 1, 2025 (+145,907, or 1.3 percent; third nationally in growth rate; net domestic migration about +84,000); Charlotte metro ~2.939 million (+54,122 in a year) and Raleigh–Durham ~1.596 million (+2.4 percent) among the fastest-growing U.S. metros.
- North Carolina DHHS, Division of Health Service Regulation, Healthcare Planning and Certificate of Need Section; N.C. Gen. Stat. Chapter 131E, Article 9 (CON required for nursing-home and adult-care-home beds, with need determinations in the State Medical Facilities Plan); House Bill 76 (Session Law 2023-7, signed March 27, 2023) raised thresholds and phased exemptions without repealing CON; Singleton v. NCDHHS upheld by a Wake County three-judge panel (December 19, 2025), on appeal; CON stands as of Q2 2026.
- North Carolina Department of Insurance, homeowners rate settlement (January 17, 2025; 7.5 percent effective June 1, 2025 plus 7.5 percent effective June 1, 2026) and dwelling-policy settlement (April 22, 2026); NC OSBM Hurricane Helene Damage and Needs Assessment (December 2024; $59.6 billion); Tax Foundation and NC OSBM (2026) on the corporate income-tax phase-out (2.0 percent effective January 1, 2026, on a path to zero by 2030).
- CBRE, 17th U.S. Senior Housing & Care Investor Survey (conducted late October 2025): senior housing cap rates fell 17 basis points over six months, assisted living down 19; JLL, 2026 Seniors Housing & Care Investor Survey (March 12, 2026): average Q4 2025 cap rate 6.2 percent, rolling four-quarter transaction volume just over $24 billion, the highest since 2015.