The age-old tale of retirement living

The UK now leads the world in the provision of rented social housing for retired people as a proportion of total housing for the over-65s. The same progress has not been made in the private sector, however. The US, Canada, South Africa and New Zealand, where care represents 5% to 6% of all housing for the over-65s, are way ahead of the UK, where just 0.5% of housing is care facilities. It’s not as if the demand is not there. The Office of National Statistics has forecast the number of over-65s to rise from 11.7m in 2015 to 14.3m by 2025, a 22% increase. By 2025 one in four of the UK population will be over 65. It is also certain that we will see a greater demand for specialist housing beyond conventional sheltered housing offering retirement living with care. Why a certainty? We are living longer and more independent lives. Then when we become frail and need support in our final years, we are surviving longer. As a result, demand is huge. Life expectancy without disability for the over 85s is just three years and this section of the population will double in number over the next 10 years. Even more relevant is the fact that the generation now moving above 65 has plenty of money to pay for the best in retirement housing with care. Legal & General estimates that there is more than £1tn of equity held in the houses of people aged over 65. Why is it, then, that we are so far behind and why have housing developers not rushed into the market? The planning system has been an obvious barrier. The best retirement schemes are large but major developments of 150 to 300 units need greenfield sites where the planning hurdles are highest. To make matters worse, uncertainty has also been caused by ambiguity around the use class of some retirement villages. Design considerations have also deterred some developers. Some are predictable, such as extra-wide doors and large circulation areas to accommodate wheelchair users, additional and oversized lifts, and staircases designed to accommodate chairlifts. Other modifications may be less obvious. Ground-floor bedrooms may have conventional looking en-suite wet rooms, but they need to be sized to accommodate the resident and two carers for future domiciliary care requirements The result is that the size of apartments and houses and common parts will need to be larger than those of conventional flats, and the quality and sophistication of the fit-out must meet the needs of residents while appealing to those downsizing. One issue that has held back investment are the event fees retirement operators charge on each resale, which were the subject of an Office of Fair Trading inquiry in 2009. The uncertainty this created will be resolved when recommendations from the Law Commission for a statutory code of practice pass into legislation as expected in 2017. The rewards are enticing. Premium prices can be achieved for adapted housing and there are also good profits to be made from the provision of high-quality care, whether that is delivered via domiciliary care, in specialist extra-care accommodation or through a traditional care home facility. With this favourable wind, the interest from investors is rising. JLL Research estimates that there will be a need for an additional 725,000 housing with care units by 2025. That’s a lot of retirement villages. Retirement communities benefit from strong cash performance, dependable, long-term and repeatable income streams from ground rents, event fees, property trading and rentals, management fees and care income streams. Many major investors who have an appetite for alternative investments such as student accommodation are already circling this exciting asset class. It is only a matter of time before the scale of retirement housing with care in Britain expands to match the amount provided in the US, Australia and New Zealand. Nigel Welby is executive chairman, Retirement Villages Group