The widely-held policy goal of 250,000 new homes annually is, sadly, a political chimera. There is neither the political will nor the productive and planning capacity to build 100,000 additional homes, or anything like it – our top 10 housebuilders plan to build around 80,000 units a year for the next five years.
But we can still be constructive about housing. Legal & General’s positive response, working alongside experts like Places for People and Shelter, has been to help create a fast-growing national housebuilder, invest £2bn in student accommodation, affordable homes for key workers, care homes and enter the build-to-rent sector.
We now have a pipeline of over 25,000 houses – but we now need more creativity with existing stock, constructive collaboration with government and a shared commitment to more homes.
“Last-time buyers” (LTBs) are the key to unlocking housing supply. Legal & General’s analysis, published today, shows that over-55 home owners with two or more unused bedrooms now account for £820bn of property, some 18pc of the £4.5 trillion housing wealth in Great Britain – and 3.3 million (63pc) of this group wants to right-size in future.
The UK built just 130,000 new homes in 2013, so helping just a fraction of this group to move would make a real difference. So here are 10 key steps to unlocking the LTB market:
1. Political engagement
Financial support for first-time buyers is good “retail offer” politics – the major parties now also need to commit to increasing age-specific housing. We need a 20-year plan to build the right houses, in the right places, for older people.
- Are the government’s planning reforms releasing more land for housing?
- Green Belt under greater threat after planning reforms says CPRE
2. Integrated policy across housing, planning, health and social care
Good quality retirement housing connects residential infrastructure with the health and social care system. Age UK’s work in the West Country shows how housing improvements cut hospital admissions and prolong independent living. The Care Act includes accommodation in its definition of a council’s duty to ensure well-being, so planners and local authority policy makers must cooperate with housing providers.
3. Diversity of tenure
Most retirement housing is sold on a leasehold basis. Not all LTBs or downsizers have paid off their mortgage, and a third of over-40s expect to be paying a mortgage in retirement. More homes across all tenures — including freehold, shared equity and rented options — would allow the system to meet a wider variety of needs. Help to Buy for LTBs, along with fewer restrictions on mortgages, could help.
4. Greater mid-market supply
Today’s retirement housing is concentrated amongst affordable housing providers and a small number of premium private sector operators.McCarthy & Stone, for example, provides high-quality housing, but is relatively small and the market is underprovided. Earlier this year, the Department of Health released an additional £120m for this purpose: it needs to be deployed.
5. Urban not rural
LTBs require well-designed, affordable space that is close to family, friends and facilities. Research tells us that over 80pc of movers want to stay within a five-mile radius. I have seen this first-hand with our developments, for example in Canning Town, east London. It suggests that the bulk of demand will be in urban areas, and that vertical living works for older people providing the design is right.
6. Tax relief
We need to cut transaction costs to incentivise right-sizing. The changes to stamp duty could be extended further, with full relief on all home purchases by those over a certain age. It would be cost-neutral. Older people would pay no stamp duty for right-sizing, but younger people buying homes that would otherwise not have been available would drive increased stamp duty receipts. Other tax measures could include a council tax holiday – say three years – for new retirement homes. These measures could be partially offset by VAT: older people are consumers too.
7. Benefit consolidation
Retirement housing is influenced by a web of public sector subsidies comprising housing benefit, social care support and health-related spending. Ensuring that these systems fit together to provide the right outcome should be a key consideration.
8. Planning policy
Approaches to retirement housing vary widely across planning authorities. This is unhelpful, and results in the value of well-planned retirement homes being underestimated. Moves in the Queen’s Speech to make better use of brownfield sites will help, but planning authorities should be bold, recognise the benefits of retirement housing and set targets for its delivery.
9. Development levies
The planning system often treats retirement housing harshly. Retirement schemes are treated like general needs housing, so they have to fund extra affordable housing through the Community Infrastructure Levy (CIL), as well as providing common areas and amenities for older people. Retirement housing could be exempted from this, or the Section 106 or CIL levies paid by commercial developers could help pay for shared spaces for retirement housing.
10. Equity release
If older home owners want to stay in their existing homes, they can still unlock unproductive housing wealth through equity release. There is a strong economic case for continued industry, government and regulatory efforts to develop this market. Total lending through equity release products in 2013 was £1.07bn – a record – but still a drop in the ocean given its £5bn potential. Legal & General is committed to growing the equity release market.
As many of us move into older age, and the number of “the oldest old” grows exponentially, the issue of appropriate housing for those aged 55 and over affects a large section of society. Our current housing stock is unproductive. Expanding housing supply, productivity and diversity for older people can help ensure that everyone can enjoy independence, dignity and a high quality of life over the whole of our lives.
This is why we need a whole-chain view of the housing market, a National Plan for high-quality older peoples’ housing that complements the efforts being made for the first-time buyers.