Michigan Adult Foster Care vs Home for the Aged: Which License Are You Buying?
Michigan does not issue a license called assisted living, so a facility marketed that way is almost always licensed by the Department of Licensing and Regulatory Affairs as either adult foster care or a home for the aged. The two run under different laws, serve different residents and cap your growth at different points. NCAL's state profile, based on 2020 data, counts more than 4,100 licensed assisted living settings in the state, averaging about 14 beds each, which tells you most of the market is small adult foster care homes.
Adult foster care covers homes serving up to 20 unrelated adults who are aged or who have a mental illness, a developmental disability or a physical disability, with care around the clock. The licensing act sorts these homes by size, from family homes with six or fewer residents up to large group homes with 13 to 20, and a consolidated set of licensing rules took effect in November 2025. Residents of any adult age qualify, which matters for your census, because a home approved to serve aged residents and one approved for developmental disabilities fill from entirely different referral sources and payers.
A family home license, the smallest category, requires the licensee to live in the home as a member of the household. If you are buying a six-bed home as an investment and do not plan to move in, you need a small group home license, with its own staffing and building requirements, before you can operate.
A home for the aged is licensed under the Public Health Code and serves 21 or more unrelated residents aged 55 or older, providing room, board and supervised personal care. The rules set no fixed staffing ratio and instead require enough awake staff on duty to meet each resident's service plan, along with a supervisor of resident care on site every shift. That gives an experienced operator room to staff to acuity, and it gives an inexperienced operator room to fall short.
An adult foster care home cannot exceed 20 residents, so a buyer planning to grow a 20-bed building into a 40-bed community is planning a change of license rather than an addition. Budget for the home for the aged licensing process, the building review and the time both take, and leave the extra beds out of your valuation until you know the property can qualify.
Large group homes must keep at least one direct care worker for every 15 residents during waking hours and one for every 20 overnight, and every licensee and administrator completes 16 hours of approved training each year. Both license types also require fingerprint background checks for employees, so pull the training and background records for every staff member before closing, because gaps found at the next inspection become your citations.
Neither license moves with the sale, so the buyer applies for its own, and the state reviews the applicant, the administrator and the building before issuing it. If residents receive services through the state's Medicaid waiver, confirm the provider enrollment steps and timing separately, since a gap in waiver payments can land in your first months of ownership.
Ask the seller for a copy of the license itself and check the license type, the licensed capacity and the population the home is approved to serve. Then pull the last three years of inspection reports from the licensing agency's public search and compare the licensed capacity to the bed count in the offering. If those numbers differ, price the deal on the license rather than the listing.
Pricing on the license also changes the rest of the model, since the capacity and the population you are allowed to serve set the ceiling on revenue no matter what the building could hold. I help care home buyers review the seller's numbers against what the license actually allows and build projections and business plans around that capacity. If you are looking at a small care home, send the listing and financials to amer@awadcapitaladvisors.com, and I can help you see what the deal is worth on the license you would be buying.