The case for Retirement Housing

Changing demographics can have profound political, economic and social implications. The UK’s population is ageing at a faster rate than ever before and the ‘grey pound’ is becoming increasingly influential. 

Indeed, it could be argued that the wealth, income, and the needs of our elderly population are likely to shape our built environment as much as younger generations in years to come. 

There is a significant potential market for age appropriate housing and this demand is only set to grow in years to come.

Current stock levels 

The Retirement Housing sector (from age-restricted over-55 housing to housing with care*), currently comprises 725,000 homes, which equates to c.2.6% of the total housing stock in the UK. According to the latest EAC data, around 23% of retirement stock is private housing. A recent survey conducted for Retirement Homesearch, a retirement property specialist said that “19% of over-50’s believe it ‘likely’ that they’ll spend their autumn years in a purpose-built retirement community”. This highlights the gap between current supply and projected demand for retirement housing in the UK.

Demographic drivers 

In 2016 there were 9.9 million people in England over the age of 65, 4.5 million were over 75, 1.3 million aged over 85 and 480,000 aged over 90, according to the latest data. These age cohorts have grown strongly since 2001, as shown in the charts in this report, and they are forecast to continue to rise, as examined in more detail on pages 4-5. By 2026, official projections show there will be nearly 12 million people aged 65 or over in England. As the older population rises, the amount of the time spent in ‘retirement’ will also lengthen. This underlines the increasing demand for Retirement Housing. 

Some 25% of over-55’s would consider downsizing; or moving into some sort of retirement, or purpose-built, accommodation, according to Knight Frank research. Again, the gap between this potential pool of demand and current supply is stark. 

If this assumption is applied to the over65s, with 25% choosing Retirement Housing over the next decade, there is a potential demand for this type of housing from an additional 582,283 individuals.** 

While there is clearly large potential demand for Retirement Housing, we have taken our analysis one step further, conducting a modelling exercise to establish the number of households for which a move in retirement might be financially viable. 

Not surprisingly, analysis of property wealth distribution in the over-65’s reveals that housing wealth varies by region. London and the South and East have a higher proportion of their population living in high value properties compared to the rest of the country. 

Overall, some 2.2 million over-65 households (46% of the total) live in a property with an average value of up to £250k, 1.9 million (38% of the total) live in a property with a value between £250k and £500k, and some 812,000 households (16% of the total) live in housing worth  more than £500k. 

This breakdown highlights the fundamentals underpinning rising activity in the midmarket Retirement Housing sector. 

We have compared the current housing equity of the over-65 population in owneroccupied housing, assuming outright ownership, and compared this to the cost 

of buying a flat in the same locality. This has allowed us to establish how many households could make this move whilst retaining at least 25% of the equity from the sale of their original home for themselves (as shown in Figure 1 below). 

^{Above: Figure 1 - Proportion of over-65 households where average housing wealth in primary home would allow a move to an averagely priced flat in the same locality with 25% of equity retained as cash} 

Some 3.5 million households can downsize to a local flat using this criteria. The highest percentages are in the South East and East Midlands where 78% of households fit the criteria. This is followed by the South West, East Midlands and the South West where three in four households could downsize with at least 25% equity to spare. Those who do not fit this criteria could usually afford to move, but without a comfortable cash cushion equal to a quarter of the value of their home. 

Detailed requirements 

The demand for Retirement Housing can be seen from several angles in the data within this report, but when considering how to deliver this housing, the preferences and requirements of potential residents should be paramount, so the most attractive forms of age-appropriate housing can be delivered. 

Knight Frank’s Tenant Survey reveals that for older people in rented accommodation, less emphasis is placed on optional amenities, in contrast to younger renters, who are prepared to pay a premium for such extras. Take, for example, communal roof gardens. The Tenant Survey showed that 45% of iGEN’s (under-25’s typically in their first jobs and living in urban areas) were willing to pay extra for access to such an amenity, compared to just 8% of renters aged over 65 (Figure 2 below). 

^{Above: Fig 2 - Top 10 amenities for which tenants are prepared to pay a premium (share of UK tenants in %)}

As has been examined above, the demand for Retirement Housing is clear. As Tom Scaife, Head of Retirement Housing, Knight Frank, examines in more detail on Page 8, the forecast growth in the UK’s older population coupled with a need for housing that can free up family homes and help alleviate the stress on the NHS and social services means that the case for retirement housing delivered at scale has never been stronger.