The future of affordability in senior housing

If you've made it this far in the series, you've probably developed a mental image of senior housing, which we hope has shifted from where you might have started. If you picture walking into an Integrated Retirement Community, you might picture slick modern buildings, with bars, restaurants and spas, luxurious décor and acres of space. You might imagine you were walking into a 5 star hotel. 

But remember for a moment that the vast majority of specialist older person's housing in the UK is affordable housing. The buildings may well be older than what you had pictured (much of it built post-war through to the 60s), and the facilities less lavish. The service models have also changed over time, away from on-site wardens offering permanent support which is hard to make work in times of challenged social care budgets, narrowing eligibility for housing related benefits and an increasing affordability challenge for those asked to contribute from their own funds. Of course, this is only available for those eligible for affordable housing.

It is generally acknowledged that over 65s in the UK, as a cohort, hold a significant proportion of the nation's wealth. According to the Intergenerational Foundation, there are over 3 million pensioner millionaires. But that does not mean that everyone over 65 has accumulated significant wealth. According to a 2023 report by the Centre for Ageing Better almost one in five pensioners are living in relative poverty. There will inevitably be a huge number sitting in the middle, not eligible for affordable housing, but equally not able to afford some of the higher-end specialist homes that are on the market. 

If we can tap into this group, the market could be hugely expanded, with positive impacts (including things like savings generated by reduced demand for health and care services, as outlined earlier in the series) for those who want to live in specialist retirement housing, as well as for those who want to invest in it. Scaling up the sector will itself make it more affordable.

How do we get to that scale? Here's a few thoughts from us:

• Amenity offering. It is lovely to have a pool on site. But it's not really necessary. It costs a lot to run, especially if temperatures have to be kept higher for those more sensitive to the cold, and the environmental cost is less than ideal too. Most people will be moving from homes which also don't have pools. So they haven't lost out. The same goes for a lot of the shared amenity space. If it's not the pool (perhaps because there is no better draw for the grandkids), it might be that something else has to give instead to ensure there remains a quality but lower cost entry point for a wider market. 
• Location. Whilst building in urban areas can be more expensive than rural areas, if the development is within easy reach of a community and its facilities, then this slims down the amount that has to be provided on site. It also links residents in to the wider community – the Housing With Care Taskforce report published last month makes a lot of strong points about the need for housing with proper community links and forming part of the wider neighbourhood rather than standing separate to it.
• Size. When we look at other jurisdictions (USA, NZ) the number of units in any scheme is on average higher than in the UK. This allows the cost of running communal facilities to be shared between more residents. The current approach to a more midmarket product in the UK has tended to land here, partly driven by the need to do so to remain viable – see for example Mayfield, and we would also put the ExtraCare Charitable Trust in this category.
• Rental. With more and more adults never owning homes, offering only a product requiring a capital payment upfront may be out of many people's reach. A rental product can be more accessible. We also see the potential for a build to rent retirement model to kickstart the overall growth of the sector, and growth helps with some of the other areas the Taskforce focused on around building up consumer base understanding, and attracting investment. 
• Shared ownership. A part by part rent product which can be supplemented by grant funding (although this comes with a more restrictive form of lease) can massively open up the market in any catchment area. This too was on the Taskforce agenda and is something we plan to discuss with Homes England in coming months.

We are seeing some parts of the market shifting in these directions and it is to be welcomed. Recent schemes aimed at a wider economic market seem to have been filling faster than those aimed solely at the high end. This does not mean that developer/operators should give up on creating aspirational places for people to live, but rather we need to be realistic about the size of the market at each price point and look to fill the gaps accordingly.