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06 Nov 2020

Government action needed to encourage investment in Senior Living accommodation post COVID-19

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High density British care homes have been at the centre of some of the worst outbreaks of COVID-19, with pensioners being the highest risk demographic, highlighting the urgent need for an increased supply of lower-density housing for those aged 65 and above.

Senior living developments providing high-specification private apartments can meet those needs and the growth of this sector should be actively supported. Although residents of these developments may need access to some on-site care support services over time on a flexible basis, they are typically independent and interested in maintaining an active life. In addition to spacious private living quarters, senior living developments feature communal areas in which residents can socialise with the opportunity of expert talks, art classes and cocktail parties. Developments typically also have facilities such as gyms and swimming pools, private dining rooms to host larger groups of friends and family and even concierge services, sometimes including chauffeurs, beauticians and technology assistants.

COVID-19 aside, the UK’s demographics suggests that more investment needs to be made in quality, attractive accommodation for older people outside of the care home model. With that in mind, the Government should take the following steps to help the sector:

Include Senior Living in the National Infrastructure Strategy

Inclusion of Senior Living within the National Infrastructure Strategy would open the sector up to much greater levels of public funding than is available under the NHS and Social Care budget, under which it would otherwise logically fall. The National Infrastructure Strategy is projected to include public spending of up to £100bn (in just the first five years of a 30-year plan) on key infrastructure and transformational change projects.

With the Bank of England recently issuing negative yield gilts for the first time, the Government would be in a position to borrow to fund expansion of the sector at very little cost. Inclusion in this major national programme would also help encourage more private capital to join in funding senior living projects, which would further aid job creation in the construction sector.

Offer guarantees on loans to fund Senior Living Developments

The Government could also consider offering guarantees on loans used to fund development of Senior Living facilities. By offering a level of guarantee, the Government would eliminate some of the risk which would encourage greater lending from banks and other funders.

Adjust REIT rules for Senior Living facilities

The tax efficient nature of Real Estate Investment Trusts (REIT) makes them an attractive vehicle for investors. REIT rules could be adjusted to have a special time limited exemption to allow development projects of Senior Living facilities to be held in REITs (as opposed to just the finished facility). This would encourage more money into the sector at a point in the economic cycle when investors might be more risk averse and be less willing to fund property development.

Greater provisions of Senior Living housing would enable older people to enjoy decades of independent, fulfilled lives, complying with social distancing and shielding guidelines but with support from medical professionals and carers easily at hand. Once the Government has laid the groundwork to stimulate investment, the Senior Living model should take off, delivering returns for both private sector investors and the taxpayer. Once the reaches a critical mass and its economic viability is clearly established, Government “subsidies” or other support can be withdrawn. Indeed, once this sector is properly established it would not be unreasonable to expect it to go through the rapid growth of other property subsectors such as the “Build to Rent” sector which is now attracting large amounts of investment from institutional funds.

The pandemic is likely to have an enduring impact on how people live their lives. Luxuries such as international travel and restaurant outings may no longer be as desirable as they once were. People may instead choose to prioritise spending their money on safe and comfortable accommodation that affords them a sense of community in their later years, and investors should be alive to the potential for growth in this area.