Out of chaos comes opportunity my first boss use to tell us.
People live longer, our workforce is changing and the simple need to rethink how we fund and pay for a population that is living 20 years longer than anyone thought. We are being forced to rethink the support and layer of care and crucially properties that sit underneath the care home market whether we like it or not.
The provision of care homes and services across the UK is not equal. The supply of care beds varies hugely across the country and does not always align with demand. Home ownership is in many cases higher in locations like the south where we have the lowest supply of care beds and in these locations, it typically aligns with the greatest challenges for staffing.
We know we need retirement communities and we know they offer a great solution for the population that wants to be proactive in their later years and maintain their independence. We know many will want to own their own home and for a significant number that will be the final move they make very happily.
Retirement communities can provide effective care and make better use of the care staff and yet the reality is that we are woefully short on villages and developments that support the wide and differing needs of the market, especially those looking for an affordable alternative to a care home.
For those that can’t afford to move into a ‘for sale’ model, need a little more support and help or a sudden event has turned things on its head, we need to rethink how we can support the forgotten middle.
Retirement rental offers a huge opportunity for the largest share of this market.
- The Care home market has changed
The effects of the last 12 months are likely to linger with us for years to come. The impact it has had, and will have on the UK care home sector, will result in older homes continuing to close at a faster rate, placing more pressure on those needing care as society ages.
Since 2008, almost 2,000 care homes have closed; whilst the bed capacity hasn’t changed as new build, larger home replace them, the choice has been reduced. Of those home closures, the vast majority will be at the lower, more affordable end.
Source: Laing Buisson
With the UK care home market valued at around £17.5 billion and growing at just over 4% pa it is a valuable part of our health system. However the change in make-up of the market, the rising cost of care and the focus on dementia and nursing care will grow the void between staying at home and moving into care as more people look to delay the cost or cannot find appropriate accommodation for their needs
For those not quite needing or affording a care home but no longer coping at home there is a gap - an opportunity.
2 - Accommodation and care options are limited
Look at any survey aimed at an older generation, that asks about care homes or fears and one thing is clear we are obsessed about avoiding care homes and maintaining independence. The irony is only roughly 1 in 12 will require a care home and the vast majority of us will not ever need to walk through the door, however we may still need care or assistance. 60% of over 60’s will live with a comorbidity before we even get started on loneliness, so how do people stay independent when faced with the choice of staying in the old family home or a care home?
Whilst they may not need formal care, what is abundantly clear is staying in the family home is equally unappealing for many people. Large empty rooms, maintenance, potential isolation and lack of community all add to the desire to move. The answer in part will be retirement communities.
Given the ageing population, the potential market for retirement rental communities is huge. Even if we take a pessimistic assumption and say that the market is no bigger than the care home market, then that is still a staggering 450,000 units.
Retirement communities will be a great option for many to maintain their independence. However, options have been limited to date on tenure and the type of accommodation. Increasing choice and crucially flexibility through rental led schemes will allow those that cannot afford the “downsizer” price, the couple who can see where the care needs are going but want to delay a move to care a bit longer, or simply the individual that wants the flexibility to move property to suit their changing needs to all remain independent as long as they can.
3 - It’s a Financial Necessity
There are 15 million people living with a long-term condition according to the Kings Fund. People with long-term conditions now account for about 50 per cent of all GP appointments, 64 percent of all outpatient appointments and over 70 percent of all inpatient bed days. The Kings Fund report also stated that treatment and care for people with long-term conditions is estimated to take up around £7 in every £10 of total health and social care expenditure with the vast majority skewed towards older people. With a 40% rise in the over 75’s over the next 10 years, a shrinking workforce, lower tax pool and struggles with housing, the maths mean we can simply not afford to keep the status quo. Giving people the ability to downsize and the ability to get the right tailored support at a lower cost will also be a key and important part of the social care dynamic.
One of the best known studies with the Extra Care Charitable Trust showed that NHS costs for their residents were cut by 38 per cent over a year compared with their costs when they first moved in. Routine GP appointments fell 46 per cent after 12 months and crucially the provision for a higher-level social care provision cost £4,556 less (26 per cent less) per person per year than providing the same level of care in the local community.
With most modern purpose-built care homes costing well over £1,000 per week, for those that do not need the full service offer or can’t afford it, retirement rental could offer both a better and more affordable solution to a larger proportion of the population.
The largest opportunity in the healthcare market - Retirement Rental
The opportunity for the real estate market and long-term investors in this space is enormous, as big if not bigger over the next 10 years than the care market, as they focus on higher acuity and dementia.
With the private pay care market almost doubling in value in the last 10 years (Laing & Buisson), there is no reason why retirement rental couldn’t follow a similar if not faster trajectory given the low base. Yet we can count almost on one hand the number of facilities that focus 100% on the retirement market and offer an alternative and affordable option to sit alongside the care home market.
The US retirement rental market grew in the 1980’s as the market sought an alternative to nursing home settings – sufficient support and community but not full-time care. Depending how you define it, the US retirement rental market is now around £66-85 billion by revenue.
The UK now sits at the same crossroads, fuelled in part by a desperate need to reinvent social care and the end customer looking for something else. For the UK, this could mean a £16-20 billion market for an equivalent size compared to the c.£300m at present.
And yet the naysayer says there is no demand for it.