'Senior living' in the UK : what are the benefits of (and barriers to) development?

The "People at the Heart of Care" white paper, published in 2021 by the Department of Health and Social Care, recognises that housing plays a key role in the debate about health and social care. It recommends "making every decision about care a decision about housing". At the same time, the government, in its "Levelling Up" white paper, seeks to increase the choice of accommodation available to older people who may be remaining for longer than is healthy in unsuitable accommodation, while seeing no other option but to "stay put". 

Senior living developments, in the form of specialist retirement developments with access to well-being enhancing care and facilities, can provide a number of social and environmental benefits. There are however tax and planning "blockers" that can discourage development and reduce demand for this type of accommodation among the older population. 

The demographic demands for 'senior living' opportunities

By 2040 the UK population is projected to increase by 5% from current levels, to 70.4 million, of whom 25% (17.6 million) will be aged 65+. 

Older people are both living longer and typically remaining in their family homes for longer. This is contributing to an increased number of households, each of reduced occupancy. Figures collected and analysed in the Mayhew Review, an independent review of the retirement housing sector, indicate that while the number of single-person households below the age of 50 is reasonably static, there is rapid growth in single-person households aged over 50. This brings consequent challenges for housing and health care policies. 

Looking at the effect of house occupancy rate on housing supply, the Mayhew Review estimates that if everyone lived in homes that were appropriately sized to their needs, 50,000 fewer starter homes would be required to be built each year. Mayhew's analysis estimates that at least 5,000 older households have the potential to downsize. However, if a mere 3% of this market were to take the opportunity, 161,000 more senior living homes would be needed each year. Even a 1% change would mean creating an additional 63,000 such homes per year. Currently the industry is building around 7,000 retirement units per year. Unless this is increased to a minimum of 50,000 units annually, the UK is unlikely to be able to meet the housing needs of its growing population and changing demographic. 

Senior living developments can take various forms, from single buildings to whole villages, but integrated retirement communities (IRC) of between 60 and 200 units offer the greatest economies of scale to the health and social care system and offer the added well-being benefits of community living. 

The UK lags someway behind the US, Australia and New Zealand in its building of IRCs and provision is particularly lacking in the north-east of England and in Scotland, Wales and Northern Ireland. In order to meet health and well-being requirements, retirement solutions need to be more evenly spread and localised because the evidence uncovered in the Mayhew Review indicates, perhaps not surprisingly, that older people generally prefer to remain connected to where they have lived longer term. 

The voluntary sector currently accounts for 65% of the UK's IRC development, with a further 28% in the private sector and only a small number in the public sector. Given that 75% of older people own their own home, there is potential demand for much greater private sector provision than is currently being built, provided that it is affordable.

The broader benefits of 'senior downsizing'

As well as helping to ease the housing crisis, the Mayhew Review considers that provision of appropriate accommodation for the older population could also bring a number of additional societal benefits.

Advantages for health and social care coupled with decarbonisation 

Mayhew proposes that stamp duty relief for older home owners could incentivise them to move to more appropriately sized accommodation, potentially in more concentrated developments. Evidence indicates that a less widely dispersed older population, living in suitably sized and provisioned accommodation, would reduce the pressure on and costs of the social care system and the NHS.

Meanwhile, the operation of existing housing stock generates considerable carbon emissions, particularly from older homes (see our earlier Insight on operational carbon). According to the Committee on Climate Change, 14 % of total greenhouse gas emissions comes from energy use in homes. A well thought out use of tax breaks could assist in reducing these emissions. While this could be by greater use of grants to incentivise existing homeowners to put in place carbon emission-reducing refurbishments, Mayhew also identifies scope to put in place stamp duty rebates for buyers of older properties, to be put towards the costs of improving the carbon efficiency of a dwelling at the point of purchase. Either way, there is an opportunity to reduce carbon emissions and help achieve the UK's net zero targets. 

Repurposing town centres

Subject to resolving any planning issues, senior living developments provide an opportunity to repurpose high streets so as to provide living opportunities that are integrated with services while also meeting urban regeneration and "levelling-up" agendas.

The housing squeeze

Currently, the prospect of home ownership seems a distant prospect for a large percentage of the younger generation because demand for housing is not being met by the pace at which starter homes are being built. Mayhew's modelling indicates that, in theory, if the UK can establish a more entrenched custom of downsizing to retirement dwellings or communities, this could help alleviate the pressure on the lower rungs of the housing market. However, if the theory is to translate into reality, there has to be an adequate supply of retirement homes that are sufficiently attractive to the "last time-buyer". The Mayhew Report considers the development of options for "later living" to be as important in alleviating the housing squeeze as is the focus on starter homes. 

Barriers to senior living developments 

Despite their wide-ranging benefits, senior living developments face a number of barriers throughout the development process, including planning and tax.

Planning

The current system of formulaic levies disincentivises senior living developments. While care homes benefit from an infrastructure levy exemption and starter homes benefit from the help-to-buy subsidy, retirement homes lose out on any exemption or benefit. Current planning rules also make it difficult to classify IRCs because they combine retirement living with care and consequently these developments can easily fail to pass a planning decision. There is a further disconnect in that planning and housing policy is made at district level while social care is a county council function. 

Planning and social care departments need to work together more closely to ensure that the need for retirement housing is factored into local authority plans and so that competition from standard housebuilders does not continue to crowd out retirement housing. There is some evidence of planning decisions being made in support of local employment in preference to change of use. If local employment is to continue as a force behind planners' decision making, it should be recognised that the spending power of the older population provides an economic case for integrated retirement living. 

Tax 

For an older person, a substantial stamp duty levy sets a barrier against moving. As set out above, stamp duty reform or rebate on "last time" purchases could make the "downsizing" or retirement community option look much more attractive. 

Osborne Clarke comment 

With cross-department government policy focused on greater housing choice for the older population as at least part of the solution to serious healthcare and levelling up issues, there is a market to be met by housebuilders and developers in accelerating the provision of retirement housing to a level of 50,000 units per year. The government could also provide support for this growing market through: 

• planning reforms that remove disincentives for councils and planners to support senior living development;
• tax incentives and/or grants to encourage downsizing and carbon reducing retro-fitting; and
• approaching the development of senior living development as a further opportunity to repurpose town centres and other brown field sites and as an integral part of a carbon-reduced future.

By improving and increasing the options and opportunity for senior living, there is opportunity for developers and housebuilders to grow the sector and to unlock the corresponding benefits in terms of housing, healthcare and decarbonisation.