A bereavement, a reduction in income or simply that the home environment becomes unsuitable because of current or emerging health and social care needs, often are circumstances that lead people to re-evaluate their home in later life. Originating from a chapter in my PhD thesis, this blog provides a summary of my recent publication in the journal Housing, Care and Support titled ‘Supply-side review of the UK specialist housing market and why it is failing older people’.
‘Specialist housing’, also known as ‘retirement housing’, are key alternatives for older people in the UK. Sheltered and extra care housing are the dominant types of housing in this sector. Sheltered housing is also known as ‘housing with support’, and extra care housing is often referred to as ‘housing with care’ indicating it’s suitability for people with a higher level of physical need.
These forms of housing provide continuity of support/care, maintain independence, provide security, peace of mind and neighbourly and social atmospheres. Around three quarters of the half a million specialist housing units in the UK are managed by the social sector – i.e. local authorities but mostly housing associations. The private sector provides around 10% of the market, with charities and other providers offering a small amount.
It is widely noted (even by those at government level) that this market is failing older people (Select Committee on Public Services and Demographic Change, 2013). To some extent, the use of the word ‘market’ implies a set of economic-centred practices that are part of the problem, but more broadly the relative failure of specialist housing for older people comes down to a lack of resources. The key overarching and current major macro issue is a chronic shortage of supply. However, the practices of housing providers show that this shortage of supply compounds an already negative situation. Simply put, a situation where demand outstrips supply does not incentivise providers to act responsively or transparently. This is evident in both the social and private sector.
Local authorities set up housing associations in the late 1990s/2000s to manage existing stock and develop housing that they couldn’t otherwise afford to do themselves. However, reflecting the social and welfare focus of specialist housing, local authorities still have a role in providing around 10% of units. Local authorities apply a banding system and have a legal obligation to provide housing based on need.
Local authorities have a relatively good gearing ratio, meaning that their debt to equity ratio per dwelling puts them in a strong position to borrow funds and build housing. However, subsequent UK governments have pursued policies that cap borrowing capabilities. You may have heard of this – it’s called austerity! On this basis, local authorities have their hands tied when it comes to addressing the chronic shortage of supply.
Associations, who now manage most social provision, have experienced relative turmoil in recent years, resulting in risk averse behaviour when it comes to building new housing. There are more details in the paper that highlight the array of complex factors. But in sum, changes to housing associations income streams is the root cause of many issues in the sector.
Housing associations used to have some grant-based income from central government, but now solely rely on revenue based income streams – i.e. rent or property sales. Housing association rents, like local authority rates, are set by central government. Housing associations based their business plan and funding models on promises of being able to increase their rents by 1% above inflation (as measured by the consumer price index – or CPI) annually. However, in a drastic reversal, housing associations were told to DECREASE their rents by 1% annually. In recent years this turmoil and change in income has severely hampered housing associations appetite and ability to borrow and build. The policy climate for housing associations means that to survive they are increasingly diversifying their income streams, and this includes selling housing at market rates. In other words, arguably the imposition of a harsh fiscal climate is eroding the social ethos of housing associations in favour of commercial considerations.
Welfare reform is another factor hitting the sector from the bottom up., What has come to be known as the ‘bedroom tax’ is reducing older people’s housing benefit entitlements and subsequently housing associations income streams – making current and future developments unviable. Many of the features of specialist housing (such as the provision of staff, social activities and wardens), which often underpin people’s motives for entering specialist housing, have also been cut back in these times of austerity.
Considering the turmoil in the social sector, the private sector should constitute an attractive alternative. However, the private sector often makes the headlines for the wrong reasons.
The private sector
Private developers tend to market developments to people with greater finances and in comparison to people who access social housing. Subsequently the private sector tends to develop in more central locations, as there is a reliance on local amenities. In turn, this tends to mean land is more expensive to buy, and costs are passed on to consumers. It seems the private sector has yet to find a workable business model that is both transparent and trusted.
Additionally, where the social sector provides housing for rent, the private sector almost exclusively offers specialist housing for sale on leasehold tenures. Leasehold tenures are associated with developments where there are shared common spaces – such as entrances, hallways, gardens, laundry rooms. Legal frameworks have developed to address the collective rights of residents whereby owners purchase temporary rights of occupation (usually for longer periods) and essentially pay rental charges to freeholders. Therefore, residents – although owners, experience the relative powerlessness and rights of being a tenant.
This situation is exacerbated by what are known as “event fees” – fees that are levied on residents by freeholders in certain situations such as people selling or subletting their home, where someone moves in, the property is inherited or a spouse dies. It has been known for these fees to be 30% of the resale value. Unsurprisingly, the Office of Fair Trading and the Law Commission have investigated these practices for their inherent unfairness. However, instead of recommending legislative change, most recently the Law Commission have recommended that the levy of fees be limited to sale, sub-letting or changes in occupancy and providers have been told to be more upfront and transparent about these fees.
If the dominant narrative in the social sector is local authorities and housing associations effectively working with one hand tied behind their back, another part of the story is that the private sector has yet to find widely responsive, fair and arguably ethical business model. As we argue in the paper (Harding et al, 2018), the private sector in particular “…tends to commodify not only housing stock but also acts to instrumentalise housing supply in favour of the profit motive and the focus on the person and her or his needs is largely ignored.”
This blog provides a basic summary of the factors currently plaguing the specialist housing ‘market’ in the UK. If you are interested in these issues I would encourage you to follow the links and read a more thorough overview in the publication below. I intend to publish the research findings from my PhD shortly, which will highlight older people’s experiences of navigating the specialist housing market through a realist evaluation of a housing options service.
For further information, see: Harding, A., Parker, J., Hean, S. & Hemingway, A. (2018) Supply-side review of the UK specialist housing market and why it is failing older people. Housing, Care and Support, https://doi.org/10.1108/HCS-05-2018-0006
Are there any other researchers out there doing work in this area? And in other national contexts? If so, I would love to hear from you. Feel free to email me at: [email protected]
Select Committee on Public Services and Demographic Change (2013) Ready for ageing? HL Paper 140 ed, TSO: London.