It would be hard to deny that the UK housing market isn’t in desperate need of reform. The government has acknowledged this, and we have been promised radical housing and planning reforms in recent announcements.
What’s key is that these radical promises aren’t swept under the carpet in favour of attention-grabbing short-term initiatives. But, seemingly, this is where we find ourselves today.
Following the economic fallout of the pandemic, the government has scrambled to breathe new life into the property market. While there is no doubt that the stamp duty cut is stimulating movement, it is a short-term fix for a housing issue that needs a long-term cure.
It is all well and good giving people an incentive to move but, if the properties they want to move into don’t exist, it’s not a universal solution, rather one that helps only a select few.
In this case, first time buyers and second-steppers. Yet the houses they need already exist, and if we could create more fluidity in the market, they would become available.
The problem lies in the properties that are under-occupied, mainly by older people who can’t find an alternative, more suitable option for their needs.
Over the last 10 years, around 7,000 specialist retirement units have been built every year, and the existing stock accounts for under 3% of total housing supply. In the UK, we have an ever-increasing ageing population with 160,000 households of over 65s being added each year. The numbers simply don’t add up.
A recent report from City Business School and ARCO (The Associated Retirement Community Operators) highlighted that thinking more broadly on housing market reform brings us far closer to a solution.
By 2040, there will be 20 million surplus bedrooms within homes across the UK. And nearly 60% of those bedrooms are in houses occupied by the over 65s. These are homes that should be occupied by families and second-steppers, but instead they are often lived in by the older population.
These homes are too large and often unsuitable for the changing needs of the older population. But to get over 65s consider moving, we must offer them options. Only this will create much needed movement in what is a non-functioning market.
Our own research found that for more than half (51%) of over 55s the main barrier to downsizing was finding the right property. This is an issue that needs to be tackled head on.
But what it does present is an opportunity. An opportunity for the government, an opportunity for us as companies that develop and operate retirement living sites and also an opportunity for investors to be a part of the long-term housing market fix.
More traditional property investment options, retail, residential student housing, are suffering the effects of the pandemic and can’t offer the value that they once did.
Shopping habits have changed forever with high streets struggling to fill retail units even before the pandemic. And working from home is set to stay with many companies offering it as a permanent option and universities are expecting significant drops in foreign students in the coming years. Not a pretty picture for the property investment market.
So investors need to look elsewhere. And as the retirement living sector starts to gather pace, large scale investors are recognising the huge potential. L&G has entered the market with its Inspired Villages brand and names like AXA and Goldman Sachs have also made moves.
At the same time, the funding models, and ways in which capital can be invested into the sector, are becoming increasingly innovative, offering investors bespoke opportunities and guarantees of long-term income.
We can’t talk about the retirement living market without talking about how it has fared throughout the pandemic. The devastating impact of coronavirus on the care home sector in the last four months has been incredibly sad. But, frankly, the issues which the industry faced had been building for years.
Many people are placed in care homes when they don’t need to be. Care homes have become a mass housing solution, and they shouldn’t be. This places huge pressure on social care services and the NHS.
Past studies have shown that living in retirement communities reduces the need for emergency NHS care by half. This is because people stay independent, are actively able to improve their health and wellbeing with the expertise of specialist personal trainers and nutritionists and have access to support and care as they get older.
Throughout the pandemic the retirement village model has proven itself with very low rates of infection. Property owners at Audley have been able to shield in their homes while also feeling supported, engaged and active.
They have had access to essential goods, care as and when they’ve needed it, support with technology to help them stay in touch with families, online fitness workouts and even cookery masterclasses. No stone has been left unturned in ensuring the owners needs have been, and continue to be, met.
For me, the solution for the housing market is clear.
There is a prime opportunity for investors with supply low, and demand high. The scope for expansion is significant. Now is the time to create a revolution in the housing market. This starts with planning reform.
We – investors, providers and government - have a real opportunity here to make a real difference, while delivering strong, long term returns.
*Nick Sanderson is CEO of the Audley Group