Forget Nursing Homes. Try a Retirement Commune.

Baby boomers who embraced communes back when they were hippies may end up back where they started: in small, cooperative group homes. This new model of elder housing is emerging as a more personal—and, often, more affordable—alternative to large assisted-living facilities.

"The evidence is still anecdotal, but this movement is definitely growing," says Beth Baker, author of Old Age in a New Age: The Promise of Transformative Nursing Homes, a book about alternative long-term-care arrangements. "I truly believe it is the wave of the future."

The small-home model of elderly living is really three distinct models, and is still so new that it is mostly ill-defined and often unregulated. Younger, healthier seniors can simply live cooperatively in multibedroom apartments, à la The Golden Girls television show. That's happening in an organized fashion in several spots around the country, says Jacqueline Grossman of the national Shared Housing Resource Center, which offers referrals to projects nationwide. In Chicago, for example, the nonprofit group Senior Home Sharing buys small ranch homes, retrofits them for group living, and rents rooms to unrelated seniors.

The second model is a more formal and institutional alternative to long-term or nursing-home care, run in small houses that are often on larger campuses and built specifically for this purpose. A good example here is the Green House Project, founded in 2001 by Bill Thomas, a geriatrician who wanted to develop a more personalized approach to eldercare. Funded by the Robert Wood Johnson Foundation, the Green House project now takes a franchiselike approach to spreading its model, with plans to create at least one Green House in every state. The typical Green House offers nursing-home-like care to groups of 10 to 12 seniors in standardized homes that include central dining and living rooms complete with fireplaces. Residents—called "elders"—each have their own bedrooms and bathrooms, may help with meal preparation, can eat when they want instead of at prescribed times, and enjoy other amenities that make it seem like a private home.

But institutionalized small homes like this often are subject to state nursing-home regulations, and the costs involved in meeting the regulations and offering high-level care may have impeded the construction of Green Homes and similar projects. Despite a lot of enthusiasm for the concept, there are currently only 50 Green House homes operating in 12 states.

The third model of small-home living for the elderly involves one individual caretaker opening up her home (women make up the majority of these caretakers) to boarders who need looking after. Termed the "board and care" model, this is more popular in some states, such as Washington state, than others and subject to different licensing requirements, depending on the services offered and the state.

It is a home such as this in Silver Spring, Md., that 95-year-old Sylvia Bassoff moved to when she could no longer take care of herself after suffering a stroke and several medical complications. First, her family found round-the-clock care to come into her private home. But at a cost of $12,000 a month, she quickly ran through her savings and funds garnered from a reverse mortgage. Her daughter, Andrea Bassoff, researched some large assisted-living facilities but found that at $6,500 or more a month, they, too, were unaffordable, and she didn't like them: "I didn't want to put my mother in something that was so institutional, and her limit was under $3,000 a month." Sylvia could have spent down her money and moved into a Medicaid-funded nursing home, but she didn't actually need nursing-home-level medical care. She simply needed help with dressing, meal preparation, and bathing that is more typical of assisted-living facilities. Bassoff now pays $2,000 a month to live in a small, private home, owned and lived in by a home health-care aide who brings in other caretakers as needed. It has a handful of bedrooms, soon to be occupied by other elderly residents.

But the individualized and homelike atmosphere that drew the Bassoffs to this home has its downsides. Every home is different, and it is harder to monitor care. "I looked at a lot of dumps that were dirty or poorly run before I found this one," says Andrea. In some cases, small-home care can cost more than institutional care, especially when it's built from the ground up. In a small home, the personalities and cognitive levels of residents can be harder to manage if they aren't compatible. And small homes are probably not the best choice for someone who likes the many activities and social opportunities of a larger facility, says the Shared Housing Resource Center's Grossman. At smaller homes, those activities might be limited to jigsaw puzzles or helping with laundry-folding and dinner preparation.

Then again, for a co-op generation that might prefer folding shirts to living in a hospital-like setting, small homes might be just the ticket.