“Leaseholders and their concerns have not been forgotten in this report,” Lord Best told guests at Parliament on Wednesday, who included senior figures in housebuilding, housing associations, the Law Commission and property managers.
The contributions of both Sebastian O’Kelly, for Carlex, and Martin Boyd, for the Leasehold Knowledge Partnership, were reported at length.
Mr O’Kelly was reported stating that the problems of retirement housing were established by the Office of Fair Trading reports into the sector – over event fees in September 2012 and the collusive tendering ruling against Peverel / Cirrus in December 2013 – numerous court cases and by the Law Commission again having to consider exit or event fees.
“He pointed out the hidden costs in retirement housing and that in many cases people are aggrieved by a lack of transparency, frustrated by the lack of redress and compensation, and the difficulty of challenging service charges and exit fees without court action.”
But Carlex also highlighted Retirement Security Limited, founded by Bob Bessell, as an example of how retirement housing could be organised. Retirement Security, based in Stratford upon Avon, empowers leaseholders through their ownership of a residents’ management company. This means they can appoint who they like to manage their sites.
Martin Boyd pointed out that these issues are going to get more prominence owing to an All Party Parliamentary Group on leasehold and commonhold headed by Sir Peter Bottomley and Jim Fitzpatrick, the MP patrons of the LKP / Carlex charity.
Lord Best’s report is a thorough overview of the retirement housing market, drawing on a wide range of different sources in the sector.
It has not been funded by one of the retirement house builders, or their trade bodies, which usually ensure that problems in retirement housing are ignored. Instead, the report was funded by Housing and Care 21, a housing association headed by Bruce Moore.
It took the extremely unusual decision of admitting management errors and handing over control of the Ashfield retirement site near Telford, in Shropshire, to the residents. Two of them were then invited to explain to Lord Best’s inquiry what had gone wrong and how the residents were getting on putting things right.
This kind of approach by Housing and Care 21 is quite unthinkable in the commercial retirement housing sector, and Mr Moore and Housing and Care 21 deserve considerable credit for having done this. Carlex’s report into Ashfield can be read here
Lord Best’s inquiry aim is to make retirement housing a far healthier and enlarged sector, which will have the added benefit of freeing up the wider housing market.
The fact that no less a figure than property developer legend Tony Pidgley, of the Berkeley Group, had contributed to the study shows the wider interest in this sector than the established retirement house builders.
Downsizing now accounts for the second most important category of buyers for Berkeley Group.
But Lord Best said:
“In this country, we have not yet reached the crucial tipping point when it becomes commonly accepted that it is good to move home before you are forced to do so for health or financial reasons.
“ … Some considerations – like emotional attachments to a family home and a close community – cannot be easily addressed. But other worries can be: concerns about service charges or hidden extra fees; about the cost and hassle of moving; about the management arrangements or terms of leases; or about loss of control over decisions affecting the home and about future care needs.”
The report, Making Retirement Living a Positive Choice (HAPPI 3: Housing our Ageing Population: Panel for Innovation), was funded by Housing and Care 21 housing association with
Jeremy Porteus, director of the Housing Learning and Improvement Network, acted as secretary.
It recommended that government should “boost significantly the very modest output of house building for older people”.
Most controversially the report recommended exempting downsizers from stamp duty.
“This will not involve a loss in revenue,” said Lord Best. “One downsizer means that on average the Treasury will benefit from three house moves that will follow. So it will gain from encouraging this sector.”
Help to buy should be extended to retirement housing; the department of health should help, owing to the savings in health and care provision attributable to communal retirement housing.
Local government needs to give retirement housing its “necessary priority” in local plans, and health and wellbeing boards “are ideally placed to promote age-exclusive housing and technology enhanced care services that combat loneliness, prevent the need for residential care and reduced requirements for domiciliary care”.
More housebuilders need to enter the market with clear and transparent information about costs and fees.
The study welcomed the extension to 999 and 1,000 year leases by leading retirement housbuilders – a change almost certainly brought about by the activities of Carlex in this sector (in our view).
The study repeated striking points made in the inquiry’s earlier reports:
- Eight million people over 60 in seven million houses are interested in downsizing;
- If they did so 3.5 million properties – two thirds being family homes – would become available, unlocking 18 per cent of the property market;
- They occupy housing worth £820 billion;
- Only 1 per cent of Britons live in purpose made retirement housing, compared with 17 per cent in the US and 13 per cent in Australasia;
- And the market is getting smaller: 30,000 retirement flats were produced yearly in the 1980s – Carlex would say they had short leases, big ground rents, exit fees and other disadvantageous terms – to 8,000 today.
The report considered the effects of loneliness and isolation on the elderly. Carlex has no argument with that at all: we have always argued for decent retirement housing and fully acknowledge the benefits of communal living.
(Our issues have always concerned the dubious practices in retirement housing: freeholds owned in British Virgin Islands; management companies subject to OFT rulings of collusive tendering; income streams cunningly embedded in the leases; arbitrary and expensive management and the rest.)
The report considered planning consents for retirement housing.
Lord Ben Stoneham, a LibDem peer, said:
“We need to overturn the planning obstacles that frustrate those who are looking to respond to the demand for affordable housing for older people.”
“The panel also noted that the current planning system has disincentives to providing accessible homes. Currently it doesn’t make financial sense for house builders to build larger more accessible homes with some communal space because they can make great a profit getting more homes with a similar floor plan on to the same site.
“Written evidence from Anchor revealed that far from encouraging the development of retirement housing the planning system throws up several disincentives.
“For example, retirement housing falls into the same planning class as general use housing, despite the wider social benefits it brings.
“This means that retirement housing developers face the same Section 106 charges to fund affordable housing as developers of general housing.
“In addition, they [Anchor] reported that retirement housing developers have to pay the same per-square metre rate of Community Infrastructure Levy as developers of general use housing, despite the fact that retirement housing tends to have common amenities or communal spaces on site that cannot be sold. These factors have acted to deter housebuilders and thereby stifle supply of “age exclusive” housing.
‘To move or not to move that is the question. If we want to provide a positive answer we need to come up with a better range of later life housing solutions.’ Jeremy Porteus director Housing LIN
Lord Best’s inquiry reported other insights.
This from the Chartered Institute of Housing:
“Retirement housing can be interpreted in a very broad sense, in terms of what the offer is in respect of accommodation and tenure options, communal facilities, activities and levels of support. This has contributed to uncertainty about what retirement living years and what residents can expect over the long-term; this uncertainty hinders proactive consideration of specialist housing as a positive option.”
And this from Merrill Lynch:
“The panel was interested to learn of research in the US for Merrill Lynch which found that in the next decade that households with a member aged 65 and above will account for nearly all household growth.
“It found that as people enter their “extended middle age”, they begin to cross what this US study reveals to be the “freedom threshold”: at the age of 61, the majority of people say they feel free to choose where they most want to live.
“Furthermore, their research noted that three in 10 pre-retirees who expected to downsize when they retired, actually upsized to a bigger home! This emphasizes the need to talk in terms of “right sizing”.”
The report continues” “Among the reasons we heard for reluctance by potential downsizers to move was the potential loss of security and value which would follow from losing freehold ownership from becoming a leaseholder.”
“We need to create a ‘go to’ and not a ‘move through’ market of retirement housing which is mutually beneficial.” Bruce Moore chief executive Housing and Care 21
The Law Commission, which is examining exit fees in retirement housing added this thought:
“Specialist housing has major benefits and is a crucial part of preparing for an ageing population. Our aim is to encourage this market sector to develop. This requires a balance. It is important that developers are given adequate and reliable income streams which incentivise them to build more specialist housing. Furthermore, those who are capital rich and income for welcome the opportunity to defer some parts of the purchase price or service charges.
“On the other hand, pricing structures must be transparent to buyers, who may be vulnerable through age and stress, and you have a great deal of information to absorb with little specialist advice. Publicity suggesting that pricing structures are exploitative or unfair could set back the whole market, and deter cautious older customers from making the decision to purchase. There is an urgent need for the industry to work together to ensure that event fees are transparent.”
Michael Voges, executive director at the Association of Retirement Community Operators, said that “uncertainty surrounding exit fees restricted supply in the retirement housing market.”
Lord Best deserves warm congratulations for carrying out a thorough inquiry into the retirement housing sector with a “flaws and all” approach.
There have been scandals in this sector; there have been dubious income streams introduced to cheat the elderly.
This needs acknowledgment, so we can move on and produce something better.
The report noted that volume retirement builders now issue 999 and even 1,000 year leases. This is good.
But it is not “virtual freehold” as McCarthy and Stone claimed – an example of marketing hyperbole that has now been dropped.
High ground rents are another area where leases can be further improved.
There is absolutely no reason for retirement flats to have ground rents that would not be out of place in prime London.