In recent years, the Build to Rent (BTR) suburban communities have emerged as a significant player in the UK housing market, offering modern, purpose-built rental properties to a diverse range of tenants. While initially aimed at maturing millennials looking to settle outside London, these communities have evolved to cater to various stages of life. However, there’s a hidden opportunity within this sector that remains largely untapped: the later living sector.
An article in BTR News delves into the potential for expanding BTR suburban communities to accommodate the needs of older generations.
A Diverse Demographic Attraction
One of the key factors contributing to the success of BTR suburban communities is their ability to attract a diverse demographic. Initially designed to serve maturing millennials, these communities have now expanded their appeal to people at various life stages. However, the question arises: can we take this inclusivity even further and tap into the later living sector?
Tapping into the Later Living Sector
The later living sector represents a significant, yet relatively untapped, opportunity for BTR suburban communities. These developments can create the ideal environment for multi-generational living, accommodating several generations of a family within a single community. This approach not only enriches the community itself but also enhances the profitability of such schemes.
While multi-generational living isn’t a novel concept, the advantages of intentionally designing new communities to cater to “cradle to grave” living are increasingly recognized. This recognition is driven by a range of housing-related challenges and societal changes.
The Downsizing Dilemma
One pressing issue is the difficulty that older homeowners face when downsizing. Over the past decade, nearly two million spare bedrooms have been locked out of the housing market due to the aging population. This inefficiency in housing stock utilization has far-reaching consequences. Between 2011 and 2021, the number of spare bedrooms in England and Wales surged from 24.2 million to 26 million. This surge occurred alongside an increase of 825,000 households living in properties with at least two spare bedrooms.
Moreover, there’s a social care crisis in the UK. A staggering 2.6 million older people are unable to access the support they need, contributing to a social care vacancy vacuum of 165,000 jobs. This shortage of social care workers and the resulting NHS waiting lists are complex issues closely intertwined with housing challenges.
Enabling older people to downsize would significantly alleviate housing pressure for younger generations. Recently, rising energy costs have encouraged some middle-aged individuals to expedite their move to smaller homes. Factors such as property size, age, construction, condition, and the increasing cost of achieving greater energy efficiency are driving this trend toward smaller, newer, rented homes.
BTR Suburban Communities: Encouraging Downsizing
BTR suburban communities have already played a vital role in encouraging downsizing. Research by Knight Frank reveals that 6% of BTR tenants are downsizers. This trend is evident in schemes managed by Leaders Romans Group (LRG), where many residents are recently retired and have relocated to BTR suburban communities to be closer to their children and grandchildren.
Interestingly, renting is no longer viewed solely as the default option for those who can’t afford to buy property. An increasing number of baby boomers, who have benefited from generous house price inflation, are choosing to release equity to support their descendants in homeownership. By divesting equity and moving into a rented property within a BTR suburban community, parents and grandparents can pass on property profits and reduce inheritance tax while ensuring they have a suitable home with the flexibility to transition to assisted living if their needs change.
International Models and Lessons
The UK isn’t alone in grappling with an aging population and the challenges of atomized societies. In Europe and the US, several successful later living schemes operate as part of larger suburban BTR developments. For instance, in Switzerland and Germany, where homeownership rates are relatively low, many retirees choose to rent by preference, not necessity. These individuals invest differently for retirement, opting for rented retirement housing and paying a 30% premium for services. The key takeaway here is that when take-up is higher, costs can be lower, making this model financially viable.
Addressing the Crisis in Social Care
However, addressing the later living crisis goes beyond increasing the number of homes. The 65+ demographic is attracted to amenities that support their health and well-being and provide opportunities for engagement and socialization. A successful example can be found in Aarhus, Denmark, where the House of Generations, an innovative intergenerational living housing project, addresses the social care crisis while also boosting the supply of affordable housing and delivering high-quality pre-school education.
This unique scheme comprises 100 retirement homes, 100 nursing home places, 40 family homes, 40 youth flats, and 24 apartments for disabled individuals. Through a “pepper-potting” approach, a demographic mix is achieved, and the scheme offers shared facilities such as gardens, a nursery, craft room, carpentry workshop, music studio, and a gym. The House of Generations exemplifies the benefits of intergenerational living for residents, managers, investors, and society at large.
Investment Opportunities in Later Living
Investors also stand to gain significantly from this approach. Density is a crucial factor in the viability and profitability of BTR suburban communities. Later living schemes tend to consist of approximately 250 apartments. Incorporating these schemes within larger communities presents an attractive investment proposition. Recent research by Paragon found that the number of over 65s in the private rented sector increased by 93% over the past decade. This demographic tends to stay in a property for longer periods, maintains homes well, and offers a stable, index-linked income, making them a reliable income source for investors.
The Growing Market
Considering that those over 65 will make up nearly a quarter of the population by 2043, there’s a glaring undersupply of purpose-built housing for this demographic. The care home sector has struggled to keep pace with demand. Consequently, investments are increasingly focused on this market. Knight Frank’s Seniors Housing Annual Review 2022/23 indicates that 67% of residential investors plan to enter this market within the next five years, compared to the current figure of 31%.
The Path Forward
In conclusion, the potential of BTR suburban communities in addressing the challenges of the later living sector is substantial. These communities offer a fresh, accessible, and genuinely aspirational solution for older age groups. Not only do they make financial sense, but they also contribute to resolving one of the most pressing issues facing society today. As we move forward, we must embrace the idea of inclusive, multi-generational living as a viable and sustainable path for the future of housing in the UK.