The business of ageing: high-end housing for the elderly

While she might not fit the stereotype, Jan Turner, an 80-year-old widow and retired pharmacist, is a confirmed cricket nut. A typical summer afternoon finds her in a seat overlooking midwicket at the ground in Taunton, south-west England, where, champagne in hand, she follows the fluctuating fortunes of her beloved Somerset County Cricket Club.

Unlike most of the ground’s regulars Turner needn’t visit the bar for a refill. Her seat is on the balcony of a second-floor apartment that has been her home for three years.

Welcome to the brave new world of UK retirement living. A wave of investor capital chasing the baby-boomer gold mine means today’s silver seniors are starting to enjoy the homes of their choosing in the neighbourhoods where they want to live.

Apart from a fast-swelling market — Britain’s population of over-65s will grow four times faster than the general population over the next five years — investors are spying bumper returns. This cohort is rich as never before: Knight Frank estimates that the over-60s in England alone have £1,200bn in unmortgaged housing wealth. The best retirement homes command sale premiums of 30 to 40 per cent over equivalent non-retirement housing in the same area, says David Birkbeck, one of the authors of Housing Our Ageing Population, a 2009 report for the Department of Health (although higher service fees in this sector make strict comparisons difficult).

In private funding alone, between £3bn and £4bn has been pumped into specialist retirement housing since 2011, reckons Jeremy Porteus, who for more than a decade has advised the government on capital spending for housing for the elderly.

PegasusLife, the company behind Turner’s Taunton home, last summer added a £450m debt facility from US insurer AIG to the £300m of founding equity from Oaktree Capital Management committed in 2012. By 2018 it will build 800 units of roomy, high-end, stair-free accommodation in areas ranging from Cotswold villages to Hampstead avenues and Devon beachfronts, says Howard Phillips, chief executive of PegasusLife. Two other specialist companies, Rangeford and Beechcroft, plan to add 800 more units in that time.

Developments are typically restricted to over-55s, and include some provision for care — a live-in nurse, say — if needed. Entry-level homes target easy access and manoeuvrability. The next bracket adds communal facilities — restaurants, a gym or pool. Some are located next to a nursing home, meaning that if one partner enters it, the other is still nearby. “The new money has allowed these specialist developers to bid for the first time against the mainstream firms for the UK’s prime real estate,” says Henry Lumby of Savills.

Some rival the smartest apartment living in any global city. Opposite London’s Battersea Park, LifeCare Residences has 108 apartments for sale, from £550,000 to £2.9m, alongside a 30-bed “boutique nursing wing”. Owners, who enjoy a free chauffeur service for local shopping trips, will move in from April; 80 per cent of the units have been sold, according to the developer.

For affluent seniors, the new breed of premium developers cannot arrive soon enough. Owner-occupied retirement housing represents just 2 per cent of Britain’s total housing stock, according to Michael Ball, professor of urban and property economics at Henley Business School. This pales in comparison with the US (17 per cent, according to a 2011 study) or Australia and New Zealand (13 per cent). Despite this, only 1 per cent of total private sector house construction today is for the elderly, according to Knight Frank.

“Policy restrictions on housing and planning mean demand far outstrips supply: countrywide provision goes from very poor to really very poor,” says Ball. The private sector is lethargic and uncompetitive, says Lumby. A single company, McCarthy & Stone, still claims 70 per cent of the owner-occupied retirement living market.

This dearth of suitable homes is not for lack of demand. Census data from 2011 show three-quarters of Britons aged 65 or over — roughly 6.5m — are owner-occupiers, 72 per cent of whom have at least three bedrooms, meaning they have more space than they can use. About 80 per cent of Savills’ vendors in Cobham, Surrey, last year were downsizers selling the family home. “Many have spent five or 10 years thinking about a move, but have been held back by the lack of options,” says Lumby.

For a glimpse of what the future might hold, cross the Atlantic. The Villages in Florida is a three-decade-old, supersized assault on the baby-boomers’ golden goose. Today, the 35 sq miles of age-restricted suburban sprawl houses 110,000 seniors (average age 63). The homes, which are still being built, sell for between $100,000 and $1m, according to the developer, and have access to a vast array of facilities, including 65 pools and 46 golf courses. About 2,000 clubs offer courses, from the American civil war to ballroom dancing.

Some activities don’t need a membership secretary: public health data suggest that much of the fun is being had at night. In the four years to 2011, chlamydia infections among over-65s jumped almost a third in the US and syphilis by more than half, according to the US Centers for Disease Control and Prevention.

Adverts may not yet depict libidinous seniors frolicking in golf carts, but savvy marketing has been instrumental to the US retirement living boom. As Americans aged, advertisers on Madison Avenue dispensed with the hackneyed stereotypes that had for decades patronised the older affluent. Tableaux of greying seniors sipping cocoa in high-backed chairs were replaced with groups sporting Hawaiian shirts on pleasure boat trips, or congregating for tennis practice.

This zealous reframing has yielded a few surprises. In 2007, Dennis Hopper — Hollywood bête noire and counterculture icon — was fronting a television ad campaign for retirement savings plans.

The UK’s advertising industry has been slower to release its silver archetype from endless sunsets viewed from drably decorated living rooms. This is probably because there is less to brag about. By the time Birkbeck wrote his report in 2009, the industry was woefully stocked. “What private homes there were tended to be designed as cramped one-bedroom flats laid out in anonymous hotel-like corridors with none of the hotel-style amenities found in European counterparts,” he says.

Exit fees — typically charged as a percentage of a property’s value when it is sold — present another obstacle. In 2013, the Office of Fair Trading completed a four-year investigation — the sector is still “under review” — and suggested several changes. PegasusLife, Rangeford and Beechcroft, it says, have complied, adding that they make no profit from delivering routine services, such as maintaining gardens, communal spaces and the panic alert systems that kick in if an owner has a fall.

The Villages in Florida, meanwhile, says extra services, bills and taxes add up to $1,000 a month. Yet the fee includes no provision for medical care, creating problems when owners need it.

“The percentage of older people who have long-term care insurance is in the single-digits, creating a huge problem of affordability,” says Katie Smith Sloane, chief executive of Leading Age, which represents US non-profit care service providers. A good care home in Boston’s affluent suburbs costs $14,000 a month.

The 1,400 or so continuing care retirement communities (CCRC) provide an alternative in the US. A hefty entry fee acts partly as insurance against future medical costs (CCRCs are regulated as insurance products) and is supplemented by a monthly rental charge.

Tom Bryan, 82, who retired from Bank of Boston, moved with his second wife to a CCRC in Lexington, near Boston, three years ago “to avoid becoming a burden on the children in the future”.

Today, he says, their 950 sq ft home would cost a new resident about $600,000 in entry fees — 10 per cent of this covers insurance against future long-term care — and $6,000 a month in rent. When he leaves he will keep the remainder of the purchase price; if he dies, it goes to his estate.

A similar model is prospering in New Zealand. Owners retain 80 per cent of the purchase value when they move on, says Angela Wester, an economist at property company JLL in Auckland. The operator keeps the rest, including the capital appreciation, and also collects a management fee.

“Initially it was hard to persuade people to give up the capital gains associated with owning their homes,” says John Collyns, who runs the Retirement Villages Association of New Zealand. Today, 12 per cent of over-75s live in New Zealand’s retirement villages, up from 9 per cent three years ago. With half of the country’s population growth between 2006 and 2013 in the over-65 bracket, this number is set to increase.

New retirement village units are being built in the country at a rate of more than 40 a week, a valuable contribution in a housing market whose tight supply would be familiar to UK policymakers. “Politicians understand that every new retirement village unit built releases a family home into the market,” says Collyns.

Yet sassy retirement villages in New Zealand and Florida may struggle as residents age. Improving health has raised the lifestyle expectations of older people, says Leading Age’s Smith Sloane. New arrivals in communities like The Villages, built for those in their fifties and sixties, are now in their seventies; and existing residents, still fit enough for ballroom dancing, see no reason to move out. This means adding care facilities to existing developments.

The vast majority of care homes built in New Zealand since 2009 have been bolted on to existing retirement villages says Collyns. “In the US, nursing homes in retirement villages built for the active ageing crowd may well turn out to be a marketing turn-off,” says Smith Sloane.

Changing working habits may also throw a spanner in the works. Up to 60 per cent of Americans over 60 say they will look for a new job after retiring, according to Careerbuilder.com, a US jobs website. More than a third of British men (and more than a fifth of women) aged 65 were still working in 2014; three decades ago the male proportion was less than a sixth.

Fewer silver seniors retiring to easy-on-the-knees country bungalows will further tighten supply in the UK’s popular urban centres. And it may spell disappointment for those young ’uns banking on downsizing by parents and grandparents to finance their first home. Staying-put seniors are bad news for the new wave of retirement living specialists, too. Jan Turner may already be enjoying the cricket, but those who follow may choose to forgo champagne picnics on the boundary.

Illustration by Bill Butcher

Buying guide: age-restricted living

Wadswick Green, Wiltshire, UK, £375,000

What A 1,008 sq ft apartment with two bedrooms and two bathrooms. The weekly service charge ranges from £129 to £157, and ground rent is £400 a year.

Perks Allotments, spa, pool, gym, chauffeured shopping trips and 24-hour concierge service.

Developer Rangeford Holdings

Contact wadswickgreen.co.uk, tel: +44 1225 584500

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Malt Yard, Woodbridge, Suffolk, UK, £549,950

What A two-bedroom, two-bathroom unit with 743 sq ft of living space. The annual service charge is £3,135

Perks Club lounge, secluded gardens, sea views, 24-hour “on-call” assistance

Developer PegasusLife

Contact maltyard.com, tel: +44 1394 250 130

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Goodwin House, Washington DC, US, $722,560 (entry fee)

What A two-bedroom, 2,091 sq ft home. On top of the entry fee, there is a monthly charge of $6,476.

Perks Fees include the cost of future nursing care, plus access to business, computing and beauty centres. There is 24-hour “on-call” assistance and on-site nursing care.

Developer Goodwin House

Contact goodwinhouse.org, tel: +1 703 824 1186

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North Shore City, Auckland, New Zealand, NZ$1.4m ($892,000)

What A 1,700 sq ft unit with three bedrooms, two bathrooms and a monthly fee of $810.

Perks A garage, gardener, communal workshop, 24-hour duty nurse, plus a neighbouring hospital and rest home.

Contact retirementvillages.org.nz, tel: +64 4 499 7090

Letter in response to this article:

Cheek of the chappie who decrees I need less space / From Elizabeth Balsom