June 26, 2017

Oldies should sell up and boost retirement housing, says Demos (in report paid for by developers)

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DemosA report into retirement housing from the think-tank Demos is getting air time today – saying that if oldies wanting to buy a retirement property were able to do so it would “free up” £307 billion worth of housing.

The full report, titled The Top of the Ladder,  can be read here 

And the first point to make about it is that it arrives thanks to “generous funding” by the Home Builders Federation.

Although McCarthy and Stone and Churchill Retirement – controlled by the McCarthy family – are quoted several times, there is no mention of problems in the sector.

Sneaky revenue generating clauses in the leases and dishonest management practices, which have both been the subjects of Office of Fair Trading investigations, go unmentioned, as do scores of court cases where residents have repeatedly demonstrated sharp practices over commissions and padded service charges.

The fact that more than half the private retirement freeholds are owned by the Tchenguiz Family Trust and are heavily indebted is also unmentioned.

The report deals with what it calls the UK’s ‘next housing crisis’ – the chronic undersupply of appropriate housing for older people.

It reports that while retirement properties make-up just two per cent of the UK housing stock, or 533,000 homes, with just over 100,000 that are privately owned.

The study then asserts the following:

  • One in four (25 per cent) over 60s would be interested in buying a retirement property – equating to 3.5 million people nationally.
  • More than half (58 per cent) of people over 60 were interested in moving.
  • More than half (57 per cent) of those interested in moving wanted to downsize by at least one bedroom, rising to 76 per cent among older people currently occupying three-, four- and five-bedroom homes.
  • These figures show that 33 per cent of over 60s want to downsize, which equates to 4.6 million over 60s nationally.
  • More than four in five (83 per cent) of the over 60s living in England (so not Scotland, Wales or Northern Ireland) own their own homes, and 64 per cent own their home without a mortgage.
  • This equates to £1.28 trillion in housing wealth, of which £1.23 trillion is unmortgaged. This is far more than the amount of savings this group has (£769 billion).
  • Therefore the over 60s interested in downsizing specifically are sitting on £400 billion of housing wealth.
  • If just half of the 58 per cent of over 60s interested in moving (downsizing and otherwise) as reported in our survey were able to move, this would release around £356 billion worth of (mainly family-sized) property – with nearly half being three-bedroom and 20 per cent being four-bedroom homes.
  • If those wanting to buy a retirement property were able to do so, this would release £307 billion worth of housing.
  • Combining NewPolicy Institute (NPI) analysis of current market chain effects of older people dying and moving each year with our own analysis of ELSA, we can estimate that if all those interested in buying retirement property were able to do so, 3.5 million older people would be able to move, 5 freeing up 3.29 million properties, including nearly 2 million three-bedroom homes.
  • If just half of those interested in downsizing more generally were able to do so, 4 million older people would be able to move, freeing up 3.5 million homes.

Retirement housing should be given special planning status to encourage its growth, Demos argues.

In a section called “obstacles to supply” – where the existing controversies in the sector are completely ignored – local authorities are again blamed for not pushing through retirement housing applications.

Hanover Housing Association reported few obstacles to building to rent, while McCarthy and Stone has “struggled more to convince local planners”.

Bill Gair, CEO of Urban Renaissance Villages, also reports “lack of imagination over planning and delivery of housing”. Carlex readers report no shortage of imagination from Urban Renaissance Villages when it comes to eye-watering exit fees, however: these can be 10 per cent.

Blaming planners is standard stuff from house builders, and it is disappointing to see Demos repeat such piffle.

Until very recently banks were not lending to retirement housebuilders – and with good reason:

McCarthy and Stone has been in hock to HBOS since its scandalous £1.1 billion sale in 2006 (orchestrated by disgraced HBOS banker Peter Cummings, who is banned for life from practising as a banker).

Churchill Retirement last month announced it has “£500 million” to buy new sites. Other developers such as Pegasus are also making bullish noises.

But McCarthy and Stone reported that only 1,600 private retirement properties were completed last year – a figure that has absolutely nothing to do with frustrations with planners.

Demos continues by saying that consumer demand was restricted by an “aversion to age segregated housing”, according to Hanover, or “ghettoisation”.

But a Demos survey of 1,500 over-60s found “considerable appetite” for downsizing. It claims that 58 per cent of people said they would consider this, which it says equates to over 8 million people nationally.

“People in semi-detached and detached houses and those who owned their property outright (with no mortgage left to pay) were more likely to consider moving in the future. Those in slightly larger and more expensive properties were also more likely than average to say that they would consider moving.”

The mean value of the homes of those prepared to move was £270,000, compared with bedrooms and £240,000 for “non-movers”.

his information echoes that provided by developers such as McCarthy and Stone, the average age of whose customers is 79.

Demos lists a range of reasons why oldies are discouraged from opting for retirement living – stress, packing belongings, loss of family home etc – but does not include the most blatant: that the retirement housing market has such an appalling reputation.

Demos concludes by making the point that stimulating the retirement housing market would be low-cost and simple: “the costs associated with overcoming the challenges of housing an ageing society are relatively small, because the money to stimulate supply of new housing, built by the private sector, is there already – locked up in over a trillion pounds’ worth of assets held by older people across the country.”

This is correct. Carlex wholly supports a strong and growing retirement housing sector … but not one based on the failed and discredited model of the past.

Comments

  1. Michael Epstein says:

    I understand the Demos report was funded by the House Builders Federation, of which Mcarthy and Stone are members.