(a) Any residential facility that houses persons with intellectual or developmental disabilities and is required by law to be licensed by the department shall not receive a license if the facility houses more than four (4) persons served and is not licensed on June 23, 2000. The department shall not license more than two (2) such residential facilities within five hundred yards (500 yds.) in any direction from other such facilities housing persons served. All set-back requirements applicable to lots where such facilities are located shall apply to such residential facilities.

(b) This section does not apply to:

(1) Housing for persons with mental illness or serious emotional disturbance;

(2) Housing for residents on property owned or leased by the state or a corporation that provides that housing if the property was recorded in the corporate or state name before January 1, 1989;

(3) Housing for service recipients when the commissioner authorizes the transfer of a license at the same site to a successor provider, if, and only if, the license holder's contract with the department is terminated, the transfer of license is necessary to sustain the quality of life of the service recipients, and the successor provider does not increase the number of service recipients at the site; or

(4) Housing for persons on a temporary or transitional basis, such as boarding facilities provided by residential schools or facilities providing services through a specialized court program addressing the needs of individuals both in court custody and dually diagnosed with an intellectual or developmental disability and mental illness.

(c) Notwithstanding any law or rule to the contrary, a residential facility or provider licensed by the department of intellectual and developmental disabilities to provide residential services to persons with intellectual or developmental disabilities shall not be prohibited from providing residential services to the elderly or adults with physical disabilities, so long as the services are adequate to ensure the health, safety and welfare of each resident.