UK Property's Senior Housing Puzzler: How To Boost Output By 700%

Investors have £6.5B of committed capital waiting for deployment in the UK senior housing sector — and nowhere to spend it.

A 700% increase in development output would solve the problem.

A new report on Housing For An Ageing Population, produced by Cushman & Wakefield in association with the British Property Federation, showed that the senior housing sector is delivering fitfully, and providing less variety of senior housing, at a time when demand is beginning to rise sharply.

Meanwhile the existing small pool of senior housing — just 602,000 units — is beginning to age, with 87% dating to before 2010.

The report's authors said the UK government's newly established Older People's Housing Taskforce needs to get a grip of the problems in the health, social care and housing systems. If the sector manages to deliver 50,000 new senior housing units a year, it could free up to 628,000 existing homes for resale by 2040, the report argued.

However, to accomplish this target would mean a 700% increase in delivery on today's level, which hovers around 7,000 units. A key recommendation intended to help inspire more development is the creation of a new planning use class in England for senior housing, CR2. Use classes are limited to houses in multiple occupation, or C3c, and care homes, or C2.

Figures show the gap between capital committed and capital deployed has been growing steadily since 2020, when they were both roughly around £1B. By 2022 a little under £1B was deployed, but £3.5B was committed.

The senior housing market is delivering fitfully and at a low level. Total senior housing delivery rates in 2022 were only 5% higher than the 10-year average and amount to a little short of 7,000 units. 

What is being delivered is overwhelmingly skewed toward integrated retirement communities, accounting for almost 4,000 of the nearly 7,000 senior housing units completed in 2022. IRCs, which involve apartments around shared facilities and are often called retirement villages, are a minority sector accounting for just 88,000 of the 602,000 senior housing units. Just 1% of people over 65, most of whom do not live in any form of specialist housing, live in IRCs in the UK. 

The growth of interest in integrated retirement communities comes as the aim and source of investment tack away from long-term funding and toward income strategies.

“There has been a particular focus on income strategies such as the rental product, with investors and operators acknowledging the first mover advantage and the race to scale in this nascent market,” the report says. “Investment has diversified from historically being the product of long-term capital only. The funding now allocated and deployed within the sector is fairly evenly split between investment managers, pension funds, private equity and high net worth individuals."

In April, the government announced the formation of the Older People’s Housing Taskforce.

The Cushman & Wakefield/BPF report was the work of a committee that included representatives of JLL, Assura and BNP Paribas Real Estate.