Intelligence: 30 October 2018The Five Challenges of Later Living

Back in 2015, we published a report which looked specifically at Local Authority responses to the challenge of housing our ageing population and sought to identify areas under specific pressure due to emerging ageing communities. A worrying lack of understanding of need, or provision in Local Authority planning was nationally evident and, despite a clear increase in commentary on this sector and new entrants to the market providing accommodation responses, this largely remains the case today.

A recent report* by Irwin Mitchell, notes that 62% of UK Local Authorities still have no elderly accommodation policy or site allocation within their local plans. At a national level, our newest legislation, the National Planning Policy Framework (launched in July 2018), still does little to recognise this immediate housing challenge, with only two mentions in the whole framework. This lack of policy stems from a lack of understanding of need, as well as a series of wider challenges the sector is facing. We have set out to review these challenges through a series of regional roundtables with the sector, which began in London this summer. Here we explain our findings so far.

Challenge #1 Understanding Demand and Supply

Demand versus supply is the premise that drives all markets and yet in the later living sector, quantifying supply, is a major challenge. Extracting the extent of provision is not an easy task, while building an understanding of the quantum of care likely to be needed in an area and the volume of ‘right-sizers,’ is generally based
on basic historic trends. Even those areas which have faced significant influxes of retirees, have rarely proactively planned for this generation. Our second Later Living report therefore sought to understand more about demand, its scale and diversity, over the next 20 years. 

Using the mosaic classification system, our research showed that although the wealthier end of the later living age group - those classed as  ‘Prestige Positions’ and ‘County Living,’ represent a significant proportion of the emerging market nationally (potentially some 4.3m people by 2038). The segments due to see strongest growth over the next 20 years are the four groups at the opposite end of the scale - ‘Rural Reality’, ‘Urban Cohesion’, ‘Modest Traditions’ and ‘Municipal Challenge’.

These population groups represent a very different challenge - not least due to average property equity of £163k or less - but they are set to grow by four times their current size, reaching a scale of 10.1m people by 2038. “This group represent a huge later living market challenge and opportunity,” says Alyson Jones, Planning Director in our London team, “but if we do not address the volume of need, at a price point they can afford, it is very unlikely that these people would be financially able to ‘right size’ into more appropriate accommodation for their long-term needs. We need to be using this analysis and others emerging, to build our understanding of demand locally. The data is there, and although it by no means offers complete clarity, it is a good step forward in helping us assess current, and provide a benchmark for future provision.”

In London particularly we can see a major challenge. "There is a huge misconception around what older people want," Says Nicola Mathers, Head of Leadership and Deputy Chief Executive at Future of London. "This demographic is all too often lumped into a single, homogenous group when in fact the over 55s are dynamic, savvy consumers.

We must offer a range of tenures from high end and mass market, ownership, shared equity and social rent, affordable, sheltered and extra care. Addressing this fully is vital for the sustainability of the capital’s housing market."

IF WE DO NOT ADDRESS THE VOLUME OF NEED, AT A PRICE POINT THEY CAN AFFORD, IT IS VERY UNLIKELY THAT THESE PEOPLE WOULD BE FINANCIALLY ABLE TO ‘RIGHT SIZE'

Challenge #2 Diversity of need

Seven of Mosaic’s UK 15 population groups have an average age higher than the national (representing 15.8m people), and within these our research demonstrated a huge variance in lifestyles as well as average property and pension wealth. Many have lived in their current family home for many years and some may still have dependents. With later living products, we are seeking to shift a mindset that individuals have spent some five decades establishing, the task in hand cannot therefore be under-estimated. They have established urban, suburban or rural lifestyles, and have consistently been encouraged to aspire to home-ownership. In tandem, they have differing perceptions of their personal care needs and care
in general.

“We need to be building this information and, as well as operators, encouraging local authorities to engage with it and acknowledge its power to inform local plan activity,” says James Donagh our Development Economic Director and lead consultant in this research. “By layering on top of the mosaic distribution maps for example, our understanding of a geographies propensity for dementia, the general health of the area’s ageing population and the extent to which any health problems limit day-to-day activities, can build up a clear picture of future care levels, extra care or in-home support needed locally. As any consultancy of our scale would, we monitor local plan progress and as we have done for housing over the last 20 years, we are working with later living providers to ensure lobbying is happening around these plans at the right time, but this voice needs to become even louder. Shifting perception of need, and building understanding, is essential if we are to see a rise in the number of Local Plans with proper policies and site allocations.”

From a tenure perspective there are also opportunities to meet this diversity of need. Gillian Girling who leads Girlings Retirement Rentals, notes that when they started renting 28 years ago, “the perception was that people only rented because they could not afford to buy. Whilst this was not true then, and no less false today, renting now has better connotations and is now viewed as a lifestyle choice. The benefits of flexibility of moving, access to cash, and removal of financial penalties on moving, means renting is now perceived with a much more positive spin. With the tsunami of older people in our population, a proportion will want to live in purpose-built retirement developments on long term tenancies. The type of property available should be as varied as the people who want to rent it – addressing the high end as well as more modest means. The crucial element of renting in retirement is the tenure. Our tenants know they have security of Assured Tenancy, to live there for as long as they wish (assuming they adhere to the tenancy agreement) and are able to sort out their financial affairs to their advantage.”

Similarly, James Pargeter, a Senior Director with Greystar, who have had huge success in delivering and managing rental products to suit the later living demographic in the US, noted at our London roundtable that he could see the potential in the UK, for specific and inter-generational products. “For us the basis of this investment lies in the long-term sustainable management of these facilities – it therefore seems to me that entities like us, looking to invest in the long-term, would deliver a very welcome addition to the sector; consistency of product, certainty of financial model and flexibility of accommodation and care.”

WITH LATER LIVING PRODUCTS, WE ARE SEEKING TO SHIFT A MINDSET THAT INDIVIDUALS HAVE SPENT SOME FIVE DECADES ESTABLISHING, THE TASK IN HAND CANNOT THEREFORE BE UNDER-ESTIMATED.

Challenge #3 New entrants

So, there’s a huge need and a diverse market and this is a sector ripe for new entrants. Within the sector we are already seeing a number of high-end market developers considering the opportunities of diversification into products that meet a wider price point, but as the demand information shows, there is a need and space within the market for so much more.

One new entrant looking to respond to this is The Kohab, a co-living brand that seeks to provide integrated housing solutions for all generations. “We live in a very ageist society, and many older people do not want to live just with other old people!” says Jason Shee, its founder. “The opportunity to innovate in such a vast, growing and undisrupted market has huge appeal for me, as has the ability to genuinely make people’s lives better. The product I am proposing will offer people an opportunity to live in a dynamic intergenerational community and create meaningful relationships across generations. Equally though, a big barrier for me to entry is competing with residential for-sale developers on sites in quality urban locations.”

Pargeter also recognises this perceived barrier, adding that, “we anticipate an initial key challenge is of the cultural perception in terms of the role a ‘Build to Rent’ solution can play in the later living market, which is used to base options around individual ownership. But crucially this challenge is as likely to be evident amongst Local Planning Authorities as end-user residents.” Educating and supporting Local Authorities in understanding these offers, and in then being able to support them in policy that overcomes the perceived barriers, seems key. 

THE BASIS OF THIS INVESTMENT LIES IN THE LONG-TERM SUSTAINABLE MANAGEMENT OF THESE FACILITIES AND ENTITIES LIKE US, LOOKING TO INVEST IN THE LONG-TERM, WOULD DELIVER A VERY WELCOME ADDITION TO THE SECTOR.

Challenge #4 Clarity and consistency of offer

To achieve any of the above, we need clarity and consistency of offer. From all discussions around this sector, it’s clear that the ‘Use Classes’ allocated to later living solutions are insufficient in clarifying the role products are playing. As such the sector has morphed products and built terminology that is diverse and inconsistent. Does the solution lie in lobbying for a change in use class?

“Use Class is more often than not, utilised as something of a blunt instrument,” says Kathryn Ventham, Planning Partner in our Birmingham team. “What the planning system lacks today is engagement with this sector. Local Plan representations are dominated by the housebuilders, and as such need is not understood, but neither is the variety of options or the merits of each. Fundamentally though, if as an industry we can’t be clear and consistent in our offer, how can we expect others to understand? We then need to communicate that clear offer to those in Local Authority, and the general public, for people to trust and buy in to the products we are offering.”

WE ARE WORKING WITH LATER LIVING PROVIDERS TO ENSURE LOBBYING IS HAPPENING AROUND THESE PLANS AT THE RIGHT TIME, BUT THIS VOICE NEEDS TO BECOME EVEN LOUDER.

Challenge #5 Urgency

Finally, the key challenge we sought to highlight in our latest report was one of urgency. We know the UK has an ageing population. We know that the voice of the sector is currently not loud or consistent enough to gain sufficient traction. We know there are opportunities for new entrants to meet growing need, and yet there is a lack of urgency in responding to these challenges. In the next 20 years 10.1m people will reach retirement age and with housing delivery rates continuing to fall woefully short of the levels our population requires, ensuring the stock we have is utilised efficiently is paramount.

In tandem, Local Authorities are dealing with cuts to adult social care and health care budgets, so it is going to be difficult for them to deal with a challenge which does not feel like an immediate one. “Councils are regularly refusing to accept new care facilities or later living products within their boundaries, due to the perception of an increased burden on their healthcare services that may result,” says Alyson Jones. “We are suffering from a lack of joined up thinking across their departments, but also a lack of clarity around how the products can support the services they offer. Only by building a stronger single voice and fully engaging with the authorities are we going to tackle this.”

In coming months, we plan to host further regional sessions on this topic, with the sector, analysing both the regionally specific picture and the responses and opportunities for us to tackle these challenges.

THE PRODUCT I AM PROPOSING WILL OFFER PEOPLE AN OPPORTUNITY TO LIVE IN A DYNAMIC INTERGENERATIONAL COMMUNITY AND CREATE MEANINGFUL RELATIONSHIPS ACROSS GENERATIONS.

* ‘Local authority provision for retirement living and care homes,’ report by Irwin Mitchell 2018

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