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

The Government should take urgent action to help encourage investment into much-needed Senior Living facilities following the COVID-19 outbreak, says Boodle Hatfield, the leading private wealth law firm.

The Coronavirus crisis has highlighted the urgent need for an increased supply of lower-density housing for those aged 65 and above. 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.

Boodle Hatfield explains that Senior Living developments provide high-specification private apartments geared towards those aged 65 and above. Residents of these developments may need access to some on site care support services flexibly over time but are typically independent. In addition to spacious private living quarters, 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 concierge services. Some may even offer services from chauffeurs, beauticians and technology assistants.

Adam Chamberlain, Real Estate Finance Partner at Boodle Hatfield says that the Government should take the following steps:

  1. 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.

  2. 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.
  1. 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.

Adam Chamberlain says: “The care homes crisis has highlighted the urgency of securing funding for lower density senior living developments, that afford more protection if there are future coronavirus outbreaks.”

“We would expect that 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.”

“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.”

“Regardless of COVID-19, 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.”

Adam Chamberlain explains that once the Senior Living accommodation sector reaches a critical mass and its economic viability is clearly established, Government “subsidies” or other support can be withdrawn.

Adds Adam: “Once this sector is properly established we would 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.”

This article was first published in The Care Home Environment on 27th May 2020.

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