How Hud’s ‘express Lane’ Could Lead To New Assisted Living Investment, Development

With a lack of new development and a growing demand for senior living, investing in more middle-market and affordable senior living projects could be a way to keep the wheel turning for new projects, according to Vium Capital Senior Managing Director Steve Kennedy.

Despite thinner margins, affordable senior living development could be an outlet for certain operators and their capital partners, Kennedy told SHN. In September of last year, the U.S. Department of Housing and Urban Development (HUD) announced an “express lane” to expedite financing for residential care facilities, including assisted living communities. 

“There has to be some other outlet for the excess capital,” Kennedy said. “You’re always going to have your Class A development but we’ve been talking about affordable and middle-market for a long time and what a better opportunity to figure it out and get the pent-up capital deployed.”

Senior living projects financed for affordable housing often have quicker lease-up, a lower basis and the ability to reposition an asset in the future, Kennedy said.

Today, private pay senior living operators are grappling with the industry’s affordability perception as the industry has largely failed to reach the “Forgotten Middle” of older adults that don’t qualify for housing subsidies but can’t afford senior living prices for assisted living and memory care due to steep care costs tied to those segments. While Class A, stabilized properties continue to be the most sought after investment class in senior living for 2026, there could be a ceiling for new capital looking to deploy in the space.

The new review process aims to reduce processing times and accelerate financing goals, with the Federal Housing Administration (FHA) prioritizing the review of low-risk, low-leverage transactions to reduce the time between applying and when financing commitments are issued through the Section 232 Mortgage Insurance for Residential Care Facilities program.

“For senior housing in particular, I think you’ll see over the next few months some further improvements that make HUD even more appealing to senior housing providers,” Kennedy said. “I think it’s a perfect opportunity for a program like HUD to fill a capital void.”

Due to an increase in overall senior living demand and rising occupancy rates, 2025 saw an increase in use of the HUD Section 232 program by closing $5.96 billion in loans between September 2024 and September 2025.

Columbus, Ohio-based Vium completed 44 HUD Section 232 deals in 2025 representing a total deal value of $714.3 million, ranking in the top three of highest ranked firms executing HUD 232 deals.

Long-term interest rates also decreased in 2025, expanding the number of refinancing chances and brought new capital into the sector, Kennedy said. A constant factor worth tracking is the 10-year U.S. Treasury bond yield, currently showing a yield rate of 4.35% as of Tuesday afternoon, an increase of 0.024 from the previous day’s trading.

While demand for senior living is a compelling investment opportunity, Kennedy said operators could resize their expectations to fit those goals within an affordable or middle-market framework, with the ability to potentially see “mid-to-high teen returns” with the right capital structure and operating partner.

The new express lane could be part of the way the industry begins “chipping away at the barriers to affordability,” Kennedy said.

To make low-cost assisted living possible, Kennedy said providers and capital need faster access to HUD Section 232 financing, using the express lane to secure long-term, fixed and low interest debt sooner and workable.

Additional policy changes and program adjustments, combined with favorable demographics, could continue to help capital flow into the sector, Kennedy added, as pent-up equity, strong occupancy rates and limited new supply pressure investors to find a place for their cash to capitalize on the industry’s tailwinds.

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