Building And Investing In Our Future Homes

The Older People's Housing Taskforce published their long-awaited report entitled 'Our Future Homes: Housing that promotes wellbeing and community for an ageing population' on 26 November 2024. Its intention is to explore how best to support people to live well and longer in an age-friendly home and neighbourhood of their choice. The report thoughtfully sets out a number of suggestions for ways to empower senior citizens and their families to access or adapt mainstream housing, to 'rightsize' at the right time, to develop new models of community-led housing and to stimulate new supply of homes and communities that support healthy ageing. In this piece, we consider what the report might mean for developers and investors in the retirement housing sector.

What Sort of Seniors Housing does the Report Recommend?

The report doesn't single out any particular form of seniors housing as the optimal solution. Instead, it emphasises that there is a currently a wide range of retirement housing that is meeting residents' needs, including purpose-designed later living housing, adapted 'mainstream' homes, and (to a lesser extent) community-led models such as co-housing. The report's main message is that the UK needs to expand retirement housing in terms of both variety and volume. According to the report, we need an estimated 30-50,000 new later-living homes per annum to meet the demographic trend towards increasing number of senior citizens in the UK, but we currently only build around 7,000 a year.

Do the Report's Findings Suggest that Investors, Developers and Operators Should Carry on Business as Usual?

No. The report highlights some interesting findings:

• New research by the Taskforce shows current private leasehold retirement housing is unaffordable for the majority of English households aged over 75. Ongoing costs such as service charges, ground rents and care packages is a key reason for homes being unaffordable, as well as many older homeowners not being able to afford the upfront purchase price (plus SDLT) for these types of properties.
• Homeowners are less likely to move than renters: over 60% of renters aged 50 will have moved by the age of 70 and nearly 80% by the age of 85, whereas only a third of homeowners aged 50 will have moved by the age of 70. This could be because downsizing does not always release much equity, particularly in parts of the country where house prices are lower. Homeowners may also be deterred by the stress and physical challenges of moving away from a family home. However, 2.24 million older households have assets ranging from £85,000 to £325,000 meaning that they are too rich to socially rent but also too poor to buy most forms of retirement housing.
• There is a growing proportion of senior citizens privately renting, which is set to double in the next 20 years.
• Current provision is concentrated on households with either low income, or substantial levels of resources, meaning the majority in the middle are seriously under-served.

Are there Any Messages for Mainstream Housebuilders?

Yes, the report contains a number of ideas for making mainstream housing more suitable for older residents, including:

• considering what age-inclusive housing can look like, including intergenerational living;
• following a trend in the USA for builders to develop new multi-family homes or new homes with 'granny annexes' to make it easier for those who want to buy somewhere to live with adult children;
• picking up on a pilot project in Auckland called 'Homeshare' arrangements which involves a formal exchange of living space for care and support; and
• taking account of the Housing our Ageing Population Innovation Panel ("HAPPI") design principles, such as accessibility for wheelchairs, dementia-inclusive design, and using smart technology.

Does the Report Say Anything of Interest to Developers or Investors into this Sector?

Yes. The report recognises that many housebuilders have left the retirement housing market and that many private investors are hesitating to invest for a number of reasons including the higher perceived risks and the extended time it takes to plan, build and fill up a scheme in this housing sub-sector compared to others. It also acknowledges many of the current barriers to investment such as the higher build and operational costs for service-led housing, legal uncertainty, slow rates of sale, uncertain resale values, problems with the planning system, and questions over the sector's long-term affordability for residents. In terms of solving this problem, the report recommends that:

• the Government needs to give the developers in this sector some fiscal, financial and planning support (at least in the short term until the market has scaled-up), along with regulatory certainty. Suggestions in the report include:
  • a new SDLT exemption for people buying a property over the age of 65;
  • a new SDLT relief for developers/operators when they buy back a retirement housing lease from a resident and grant a new lease to a new resident;
  • granting developers council tax relief on empty units in schemes where care is offered;
  • making capital allowances available to commercial operators of retirement housing with care;
  • introducing an Older People's Housing Guarantee Scheme, to provide low-cost loans, investment facilitation and/or debt guarantees to accelerate the growth of this market, including providing funding against future operational income streams until a scheme matures;
  • using the Government's convening power to promote collaboration between operators and major housebuilders;
  • reviewing and expanding funding for the Older People's Shared Ownership Scheme;
  • revising the NPPF to support the sector by, for example, introducing a planning policy presumption in favour of retirement housing; and
  • exploring new legislation and regulation for the sector, such as introducing the Law Commission's 2017 recommendations about event fees, looking into lifetime leases, and considering sector-specific legislation as in New Zealand.
• the developer/ investor/ operator side of the equation needs to come up with some ways to price some of their properties at the lower to middle-affluence market. This might include:
  • using pricing models in which the additional costs of communal facilities are recovered over the lifecycle of a scheme, rather than through a higher initial purchase price. As part of this, stronger event fee regulation would increase certainty and remove some investor risk, as well as increasing protection and transparency for consumers;
  • building larger schemes to reduce the price per unit and using modular building techniques (although this does not seem to have turned the dial for mainstream housing so far);
  • designing more schemes where the general public can use (and pay towards the upkeep of) leisure and dining facilities on-site rather than them being exclusively for residents (which is already used in many IRCs); and
  • widening the range of tenure options, including building more shared ownership units and using 'lifetime leases' (a form of licence to occupy sometimes used in jurisdictions such as New Zealand for retirement housing) instead of long leases or freehold tenures. There was little mention of commonhold in this report, a form of tenure which the Government intends to make the default tenure for new-build flats by the end of this Parliament, as discussed here.

Conclusions

The Taskforce's report mentions a number of inspiring ideas and initiatives, and is enthusiastic about how the UK can boost the supply of retirement housing. Developers and investors will now need to wait to see how the Government responds to its recommendations.

The Taskforce's 10 recommendations

1. Standardise definitions of seniors housing to enable partnership working across the private and public sectors and to build public understanding of what's available.
2. Incentivise a wide range of seniors housing options. Senior citizens are highly diverse in their needs, wishes, backgrounds and identities and choice must be available and accessible to all.
3. Ensure more housing is designed for later life, so that we optimise all forms of seniors housing including mainstream housing, community-led housing, service-led housing and, though not the focus of this report, care homes.
4. Create age-friendly, dementia-inclusive, faith and culture-sensitive communities to enable people to live independently and well, whatever housing they choose to live in.
5. Expand seniors housing at scale and ensure it is affordable to live in, and viable to finance, build and operate. This will involve creating greater incentives for investment.
6. Strengthen planning policies in order to incentivise and accelerate the development of new forms of retirement housing and help shape mainstream housing and the built environment to be more age-friendly, dementia-inclusive, faith and culture-sensitive.
7. Establish a national information platform and local hubs so that people understand what sorts of retirement housing is on offer, what would best meet their needs and how to take them up.
8. Build consumer confidence in a range of different types of housing and provide regulatory clarity for providers and potential investors.
9. Enhance innovation, research and professional development so we learn more about senior citizens' needs and what works to meet them.
10. Create collective leadership to drive change. The report aims to inspire and empower ambitious action, from the top of government and outwards to communities and families, with a view to fully integrating housing health and care at all levels of the system.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.