As the UK’s population ages, new forms of accommodation are emerging that cater for older people’s physical needs while still offering a modern, desirable lifestyle.
Over the next 25 years, the growth of the over 65 population will grow at three times the UK population. The number of those over 85 is expected to more than double to 3.2 million
While life expectancy has grown, healthy life expectancy has not kept up. Changes to lifestyle increasing prevalence of chronic illness and disease such as diabetes and heart disease means more people are living longer in ill health. In the past two decades, the amount of time spent needing daily care in later life has risen from 1.1 years to 2.4 years for men and from 1.6 years to 3 years for women, according to Newcastle University.
Care homes have been the traditional route for the elderly, but these are increasingly being viewed as an option for those who require 24/7, high intensity end-of-life care.
The days when people spent several years in a care home are long gone, yet JLL estimates there will still be a shortfall of nearly 3,000 care home beds in 2018 due to the aging demographic and the high rate of bed closures.
The Local Government Association says the UK needs a “residential revolution” to provide enough homes to support the aging population. It predicts the number of specialist homes will need to increase by 400,000 in less than 20 years in order to meet demand.
Philip Schmid, Director – Healthcare Investment, Alternatives at JLL, says: “The single biggest challenge facing older people in the UK is a complete lack of appropriate housing choices to suit their lifestyle, care or support needs as they age.”
Retirement living gains ground
In recent years the growth of the retirement living sector in the UK has offered more choice for older people through a model that combines self-contained units with communal facilities and on-site care. Yet less than 1 percent of over 65s in the UK currently live in housing with care developments compared to 5 percent in Australia and New Zealand.
Anthony Oldfield, Director, Alternatives at JLL, says: “Retirement living properties are an attractive option because residents still have their own home and retain their independence but also get access to support or care and amenities that help retain independence and provide a sense of community.”
As well as providing an alternative later life care solution, retirement living properties may help to address another problem – the UK’s housing shortage. When elderly people downsize to a retirement living property it often frees up a large family home.
“If the UK retirement living market were to match more established markets, like the US or Australia, it would generate up to 2.6 million sales in the housing market – three for every downsized property,” says James Kingdom, Associate Director – Research at JLL. “Just over half of owner-occupied homes are under-occupied compared with 14 percent for the private rented sector.”
At present there is an under-supply of retirement living accommodation for people in the mid to upper wealth tiers, although some mainstream developers have started to tap into these markets. JLL estimates 75 percent of the existing market is still provided on an affordable tenure.
Most retirement living accommodation is ex-local authority or social housing. Built in the 1970s, it is no longer fit for purpose as it offers few amenities with little opportunity for social interaction. At the other end of the scale there are developments like Audley Retirement, which is more like a 5-star hotel.
Kingdom says the mid-market offers a huge opportunity. “We’ve seen in Australia and the US that there are lots of service offerings catering to people of different needs with varying degrees of wealth. And this is not just of benefit to the elderly population – it has a direct knock-on effect to the wider population by unlocking the residential market,” he says.
Investors are also taking notice. The burgeoning retirement living market is more attractive to investors compared to the traditional care home sector, given the complex funding model for care home residents and the lower regulatory risks.
“Retirement housing is a housing move, and a proactive choice as opposed to care which may be a reactive decision,” Oldfield explains. “People are able to use their existing housing equity to downsize, free up capital and take control of the accommodation and potential care needs as they age”.
It also helps that investment case for retirement living properties is much clearer to both the end consumer and investor, says Schmid. Recent research by JLL estimates that these could double in value in just over a decade.
Schmid says there has been a significant uptick in interest over the past 12 months, particularly from larger investors.
“We’ve seen an array of different models being considered – from homes providing simple support all the way through to developments offering an extensive range of additional hospitality services and care” he says.
“The developments that have been most successful are those that are residential-led, with care almost as a side offer. Retirement living is evolving to become an aspirational product and it is enticing people in.”