Last updated 2026-07-26
TL;DR
Assisted living facilities are larger, apartment-style communities with more amenities and higher staff-to-resident ratios in the office sense. Residential care homes (group homes) are smaller, house-style settings, usually 6 to 10 residents, with more personal attention but fewer on-site services. Neither is covered by Medicare room and board; Medicaid may help through state waiver programs.
What is assisted living?
Assisted living is a licensed housing option for adults who need help with daily activities like bathing, dressing, medication management, and meals, but who don't need the round-the-clock skilled nursing care a nursing home provides. Most states license these under names like "assisted living facility," "residential care facility for the elderly," or "personal care home," and the rules vary a lot by state because there's no single federal assisted living law. The National Center for Health Statistics, part of the CDC, defines residential care communities as places that provide room, board, and at least two of the following: 24-hour supervision, help with activities of daily living, or health-related services, to people who don't require the level of care found in a nursing home [1]. As of the most recent National Study of Long-Term Care Providers, there were roughly 28,900 residential care communities in the U.S. with about 918,700 licensed beds [1]. A typical assisted living building looks like an apartment complex or a converted hotel. Residents usually have private or semi-private units, a dining room, common areas, and scheduled activities. Staff are on-site but not necessarily in your unit all day. This is the model most people picture when they hear "assisted living," and it's a very different physical setting from a home in a residential neighborhood. For operators building out a facility-model community rather than a home-based one, the licensing path, staffing ratios, and building code requirements look different from a group home. See our guide to assisted living facilities for the facility-scale version of this process.
What is a group home?
A group home (also called a residential care home, adult foster home, or community residential facility depending on the state) is a licensed home, usually an actual single-family or converted house, where a small number of residents live together with support staff. Capacity is typically capped somewhere between 4 and 16 residents, though the exact number depends entirely on your state's licensing category and local zoning. Group homes serve a wider range of populations than assisted living alone. Some house seniors who need help with daily living but want a homelike setting instead of a big facility. Others serve adults with intellectual or developmental disabilities, people in mental health recovery, or people in substance use recovery. The physical building often looks exactly like the other houses on the block, which is part of the appeal for residents and part of the friction with neighbors and local zoning boards. Because a group home operates at a smaller scale, staffing is usually built around one or two direct care workers per shift rather than a large staff roster. That can mean more one-on-one time with residents, but it also means less redundancy if a staff member calls out sick, and less capacity for specialized therapies on-site. Most states run group home licensing through a health or social services department, and the license category depends on who you serve, more than how big the building is. If you're weighing whether to open a facility-style assisted living operation or a smaller group home, our assisted living overview covers the facility side, and this article focuses on comparing the two models directly.
Assisted living vs residential care homes: side-by-side comparison
| Typical resident capacity | 20 to 150+ | 4 to 16 | |
|---|---|---|---|
| Building type | Purpose-built apartment complex | Converted single-family house | |
| Staff-to-resident ratio | Set by state, often tiered by shift and acuity | Often 1 staff per 4-8 residents per shift, varies by state | |
| Licensing agency | State health or aging department | State health or social services department | |
| Median national assisted living cost | $70,800/year (2023 median, Genworth/CareScout survey) | Often lower, but wide variance by state and service level | |
| Medicaid coverage | Room and board rarely covered; care costs sometimes covered via HCBS waiver [2] | Same waiver mechanism, varies by state program | |
| Zoning fit | Commercial or multifamily zoning | Often residential zoning, may need conditional use permit | |
| Typical population served | Seniors needing ADL help | Seniors, IDD, mental health, or recovery populations depending on license type | The cost figure above comes from the Genworth Cost of Care Survey, last conducted in 2023 in partnership with CareScout, which put the national median annual cost of assisted living at $70,800, or about $5,900 a month. Group home and residential care home pricing isn't tracked as consistently at the national level, partly because licensing categories and included services vary so much state to state. |
Here's how the two models stack up on the factors operators and families care about most. Numbers below are typical ranges; always confirm exact figures with your state licensing agency because they shift by state and even by county. | Factor | Assisted living facility | Residential care / group home |
What is an assisted living facility, exactly?
An assisted living facility is the formal, licensed version of the apartment-style model described above. It's a physical building, licensed by the state, that provides housing plus a defined package of personal care and supervision services, but stops short of the skilled nursing care level. States define the license category differently. Some call it "assisted living facility," others "residential care facility," "adult care home," or "personal care home." What they share is the core service bundle: help with activities of daily living (bathing, dressing, toileting, transferring, eating), medication management or assistance, meals, housekeeping, and 24-hour staff availability, though not necessarily 24-hour nursing. The Centers for Medicare & Medicaid Services (CMS) doesn't license assisted living facilities directly; licensing is a state function. CMS does define Home and Community-Based Services (HCBS) that some assisted living residents may access through Medicaid waivers, which is a separate mechanism from facility licensing itself [2]. If you're researching how to open this kind of building specifically, rather than a smaller group home, start with our assisted living facility licensing walkthrough, which covers the application, staffing plan, and inspection prep for the facility model.
Assisted living vs nursing home: what's the real difference?
The core difference is the level of medical care. Assisted living is for people who need help with daily activities but not ongoing skilled nursing care; a nursing home (also called a skilled nursing facility) is for people who need daily medical care, rehabilitation after a hospital stay, or supervision from licensed nurses around the clock. Nursing homes are certified under federal Medicare and Medicaid rules found in 42 CFR Part 483, which requires things like a registered nurse on duty at least 8 consecutive hours a day, 7 days a week, and sufficient staff to meet each resident's care plan [3]. Assisted living facilities aren't held to that same federal nursing staffing requirement because they're licensed and regulated at the state level, not federally certified as Medicare/Medicaid providers in the same way. Cost also differs sharply. The Genworth/CareScout 2023 survey put the median annual cost of a semi-private nursing home room at $104,025 and a private room at $116,800, compared to $70,800 for assisted living. Nursing home stays are far more likely to be covered by Medicare for short-term rehab (up to 100 days per benefit period under specific conditions) [4], while assisted living almost never gets Medicare coverage. In plain terms: if someone can still manage most of their own routine with some help and doesn't need a nurse checking on them constantly, assisted living or a residential care home fits. If someone needs wound care, IV therapy, ventilator support, or has advanced dementia requiring skilled medical supervision, a nursing home is the appropriate setting, and licensing your building as assisted living or a group home won't legally let you serve that acuity level anyway.
What does assisted living actually provide day to day?
Assisted living provides housing, meals, help with activities of daily living, medication support, housekeeping, laundry, social activities, and 24-hour staff availability for emergencies. What it does not typically provide is skilled nursing care, so residents who need daily injections, wound vacs, or ventilator management usually need to move to a nursing home or bring in outside home health services. A standard day might include a staff member helping a resident get dressed and take morning medication, three meals served in a common dining room, a scheduled activity like exercise or a craft session, and staff checking in periodically. Personal care plans document exactly what help each resident needs, and states typically require these plans be reassessed on a set schedule, often annually or when a resident's condition changes, though the exact interval depends on your state's regulations. Group homes provide a similar service bundle but on a smaller, more personal scale. Staff in a home with 8 residents get to know each person's routine intimately, which some families prefer over the more institutional feel of a large facility. The tradeoff is fewer on-site amenities: don't expect a hair salon, a fitness room, or a full activities calendar in most small group homes.
Does Medicare cover assisted living facilities?
No. Medicare does not cover the cost of room and board at an assisted living facility or a residential care home. Medicare.gov states plainly that Medicare and most health insurance plans don't pay for non-skilled assistance with daily activities, which is what assisted living primarily provides [5]. Medicare Part A may cover a short-term skilled nursing facility stay after a qualifying hospital stay, up to 100 days per benefit period with cost-sharing kicking in after day 20, but that's a nursing home benefit, not an assisted living one [4]. Medicare Part B can cover medically necessary services a resident receives while living in assisted living, like doctor visits, physical therapy, or durable medical equipment, but it never pays the facility's monthly rent or care fee itself. Medicaid is the more realistic public funding path, and even then it's limited. Most states use Home and Community-Based Services (HCBS) waivers, authorized under Section 1915(c) of the Social Security Act, to help cover personal care costs in assisted living or group home settings for people who'd otherwise qualify for nursing home level care [2]. Medicaid.gov describes HCBS waivers as allowing states to "furnish an array of home and community-based services that assist Medicaid beneficiaries to live in the community and avoid institutionalization" [2]. Critically, Medicaid waivers typically pay for the care component, not room and board, so families still cover housing costs out of pocket, through long-term care insurance, or through a mix of savings and other benefits. Coverage rules, waiver names, and eligibility income limits differ by state, so anyone counting on Medicaid support should confirm with your state Medicaid agency and your state licensing agency before assuming a facility accepts waiver funding.
How to start a group home: the basic steps
Starting a group home means getting licensed by your state, choosing a compliant property, building a staffing and policy plan, and passing a pre-licensing inspection, roughly in that order. The exact sequence and required forms differ by state and by the population you plan to serve (seniors, IDD, mental health, or recovery), so treat this as the skeleton, not the finished map. First, identify which license category fits your target population and confirm the licensing agency with your state's health or social services department. A home for seniors needing ADL help usually falls under an adult care or residential care license; a home for adults with intellectual or developmental disabilities typically falls under a separate IDD-specific license administered by a different state division. These are not interchangeable, and applying under the wrong category is one of the most common early mistakes. Second, secure a property that meets both the state's physical plant requirements (room sizes, exits, sprinkler or fire alarm systems, ADA accessibility in many cases) and local zoning. Zoning conflicts are a frequent stall point; many jurisdictions require a conditional use permit or special exception for a group home in a residential zone, even where state law protects group homes from outright zoning exclusion under the Fair Housing Act . Third, build your operating documents: a policy and procedure manual, staffing plan with ratios and required training hours, emergency and evacuation plans, resident rights disclosures, and medication management protocols. States generally require these as part of the license application packet, not as an afterthought once you're open. Fourth, complete required background checks for all staff and owners/operators, secure liability insurance, and schedule your pre-licensing inspection. Inspectors check the physical building, review your policy documents, and sometimes interview staff before issuing the initial license. This is genuinely a paperwork-heavy process, and assembling a compliant application packet from scratch, state by state, is where a lot of first-time operators lose months. That's the specific gap our $299 State Group Home Licensing Kit is built to close: state-specific application checklists, policy manual templates, and staffing plan worksheets so you're not reinventing the packet from zero. You can start building yours at /licensing-kit-builder.
How do I start a group home if I've never done licensing paperwork before?
If you've never done this before, the honest answer is to start with your state licensing agency's own application checklist before spending money on anything else. Every state publishes (or will provide on request) the specific forms, fee schedule, and inspection standards for your license category, and no third-party resource replaces reading that primary document first. From there, budget real time, more than money, for three things: the zoning and property search, the policy manual and staffing plan drafting, and the background check and inspection scheduling. Each of these can take weeks to months depending on your state's processing times and your local zoning board's meeting schedule. Some states publish average processing timelines for license applications; confirm this figure with your state licensing agency since it varies widely and changes with staffing levels at the agency itself. A realistic first-year checklist looks like this: pick your population and license category, confirm zoning eligibility for your target property before signing a lease or purchase agreement, draft your policy manual and staffing plan in parallel with property search, submit background check paperwork early since it's often the longest lead time item, and schedule your inspection only once the building is genuinely ready, since a failed first inspection can cost you weeks of re-inspection wait time. Many first-time operators underestimate the paperwork volume specifically. A full license application packet in most states runs to dozens of pages across the application form itself, the policy manual, the staffing plan, floor plans, and various attestations and disclosures. Building that packet correctly the first time, rather than getting bounced back for corrections, is the single biggest lever new operators have over their own timeline.
Assisted living vs residential care homes: which fits which resident?
Assisted living tends to fit residents who want more independence, more amenities, and more social opportunities, and who are comfortable in a larger community setting. Residential care homes tend to fit residents who want a quieter, more homelike environment, more consistent one-on-one attention from a small staff team, and less noise and traffic than a big facility. For operators, the choice is really about scale, capital, and population. A facility-model assisted living build requires more capital upfront (commercial real estate, larger build-out, larger staff roster) but can serve more residents per location and often has clearer, more established zoning pathways since it's commercial by nature. A group home requires less capital to start, can use a residential property, and lets you build a track record before scaling to a second or third home, but it caps your resident count hard and puts you more at the mercy of local zoning boards that may be unfamiliar with your specific license type. Neither model is inherently better; they solve different problems for different residents and different operators. Someone launching their first residential care business with limited capital and a passion for a specific population, say adults in mental health recovery, is usually better served starting with a single group home rather than trying to finance a 40-bed assisted living building on day one.
Pros and cons: a quick gut check
For assisted living facilities: pros include more on-site amenities, a larger staff roster that can absorb call-outs, and often more established zoning and regulatory pathways since these are commercial buildings by design. Cons include higher build-out and operating costs, a more institutional feel that some residents and families actively avoid, and higher median pricing for residents ($70,800/year national median, per Genworth/CareScout 2023). For residential care / group homes: pros include lower startup capital, a homelike environment many residents and families strongly prefer, and the ability to specialize deeply in one population (IDD, mental health, recovery, or senior care). Cons include a hard cap on resident capacity limiting how much any single home can support financially, more zoning friction in residential neighborhoods, and thinner staffing margins if someone calls out sick on a given shift. Neither list is a knockout blow against either model. The right choice depends on your capital, your target population, your local zoning landscape, and honestly, whether you'd rather run one thing really well at small scale first or take on a bigger capital and staffing commitment from the start.
Frequently asked questions
What is assisted living?
Assisted living is a licensed housing option for adults who need help with daily activities like bathing, dressing, or medication management, but don't need the round-the-clock skilled nursing care of a nursing home. It's typically apartment-style housing with on-site staff, meals, and scheduled activities, licensed and regulated at the state level rather than federally.
What is a group home?
A group home is a licensed, home-style residence, usually a converted single-family house, where a small number of residents (often 4 to 16) live together with support staff. Group homes serve seniors, adults with intellectual or developmental disabilities, or people in mental health or substance use recovery, depending on the specific state license category.
What is an assisted living facility?
An assisted living facility is a licensed building that provides housing plus a defined package of personal care services (help with bathing, dressing, medication, meals) and 24-hour staff availability, without providing full skilled nursing care. States license these under varying names, and there were roughly 28,900 such communities nationally with about 918,700 beds as of the most recent federal survey.
What is the difference between assisted living and a nursing home?
Assisted living is for people who need help with daily activities but not ongoing medical care. A nursing home is federally certified under 42 CFR Part 483 and staffed with licensed nurses to provide skilled medical care, rehabilitation, and 24-hour clinical supervision. Nursing homes also cost significantly more, with a 2023 median of $104,025/year for a semi-private room versus $70,800 for assisted living.
Does Medicare cover assisted living facilities?
No. Medicare does not cover room and board at assisted living facilities or group homes. It may cover medically necessary services received there, like doctor visits or physical therapy, and it covers short-term skilled nursing facility stays under specific conditions, but it never pays an assisted living facility's monthly fee.
Does Medicaid pay for assisted living or group homes?
Sometimes, through Home and Community-Based Services (HCBS) waivers authorized under Section 1915(c) of the Social Security Act. These waivers typically cover the care component, not room and board, and eligibility, coverage, and waiver names vary by state. Confirm specifics with your state Medicaid agency.
How do I start a group home?
Identify the correct license category for your target population, confirm requirements with your state licensing agency, secure a property that meets both building and zoning requirements, draft your policy manual and staffing plan, complete background checks, and pass a pre-licensing inspection. The sequence and forms vary significantly by state.
How much does it cost to start a group home?
Startup costs vary widely based on state licensing fees, property costs (purchase, lease, or renovation), staffing, insurance, and required equipment. There's no reliable national average because license fees and building code requirements differ by state and even by county; confirm exact fee schedules with your state licensing agency before budgeting.
What's the difference between assisted living and a group home?
Assisted living is typically a larger, apartment-style building serving 20 to 150+ residents with more amenities and staff. A group home is a smaller, house-style setting, usually 4 to 16 residents, offering a more personal, homelike environment with fewer on-site amenities but often closer staff-to-resident relationships.
Can a group home serve people with dementia?
Many group homes and assisted living facilities do serve residents with mild to moderate dementia, often under a specific memory care license or endorsement. Advanced dementia requiring intensive medical or behavioral management may exceed what a given license category allows; confirm scope-of-care limits with your state licensing agency.
Is a group home the same as a nursing home?
No. A group home provides housing and personal care assistance without the federally required skilled nursing staffing of a nursing home. Nursing homes are certified under 42 CFR Part 483 and must have a registered nurse on duty at least 8 consecutive hours daily; group homes and assisted living facilities are licensed at the state level under different standards.
What does assisted living provide that a nursing home doesn't?
Assisted living typically provides a more independent, homelike lifestyle with private or semi-private apartments, more scheduling flexibility, and a social community atmosphere. It does not provide the intensive medical and skilled nursing services a nursing home offers, so it fits residents who need daily living support but not clinical care.
Sources
- CDC National Center for Health Statistics, National Study of Long-Term Care Providers: Definition of residential care communities and count of ~28,900 communities with ~918,700 beds
- Medicaid.gov, Home & Community-Based Services 1915(c): HCBS waivers under Section 1915(c) help states fund community-based care to avoid institutionalization
- eCFR, 42 CFR Part 483 Requirements for States and Long Term Care Facilities: Federal nursing home staffing requirements including 8 consecutive hours of RN coverage daily
- Medicare.gov, Skilled Nursing Facility Care Coverage: Medicare covers up to 100 days of skilled nursing facility care per benefit period under specific conditions
- Medicare.gov, Long-Term Care: Medicare does not cover non-skilled assistance with daily living activities like assisted living room and board