Hi William
Based on what you have described,and bare in mind i haven't seen the building, I do tend to agree with you.
Actually I would argue that this type of supported living is safer than a domestic dwelling scenario for many reasons.
As someone suggested earlier do look at the Adult Placement guide for an additional angle on your scenario.
And please do challenge the fire inspector involved. Why not speak to the officer's station commander , to see if he or she agrees with their officers approach.
If all else fails then hey why not call their bluff, nothing to loose in going for a determination. It costs nothing although I realise time is money. But you take my point.
With regards to your hapless fire officer, they do default to benchmark standards and publications when it comes to enforcement, its up to the RP to suggest alternatives, not the fire officer and it is easy to become sceptical and infer all inspectors are code hugging prescription junkies, as Jokar suggested.
If alternatives are put forward the officer needs to be satisfied they will work, thats not always easy, but I suggest in this scenario common sense will hopefully prevail.
Are you satisfied the service users will evacuate without causing too much of a challenge for staff?