Looking beyond homeownership for older people’s housing

We need to remind ourselves that compared with other countries, the UK is unusual in that it uses long leases (which are subsequently resold from one customer to the next) in modern, service-based housing-with-care schemes for older people. These schemes, known as integrated retirement communities, feature comprehensive service offerings such as restaurants, gyms and personal care (in contrast to age-restricted retirement housing, which offers fewer amenities and services).

In contrast to the UK, countries with a more developed integrated retirement community sector have replaced a focus on property ‘ownership’ with a focus on the things that matter most to customers: affordability, cost certainty and consumer protection – all of which are delivered using contracts.

“Consumer research commissioned by ARCO found that while older homeowners value the security it provides, they also describe the burdens of homeownership”

It is easy to see why the taskforce held up this model as best practice. The growth seen in other countries speaks for itself, and if the UK were to reach the levels of provision seen in New Zealand today, we would need to build around 700,000 additional units by 2050.  

Operators of integrated retirement communities in the UK have long studied the contract approach to service-based housing in New Zealand. In 2020, ARCO launched Project Oracle to explore how a contract-based model could be used in the UK. 

So far, this process has involved extensive dialogue and collaboration with stakeholders from various countries, including New Zealand, Australia, Israel, the United States, Canada, South Africa and Germany. It has included developing the legal and commercial aspects of contract models, consulting with institutional investors, conducting focus group research with potential customers, and organising a fact-finding trip to New Zealand for ARCO members in 2024.

Our core conclusions to date are that the contract approach could work in the UK. It could be used in new and existing schemes, and would further improve affordability and access to the sector for older people on an average income. This is the key exam question for the Older People’s Housing Taskforce and something likely to be of keen interest for the Labour government.  

To be clear, implementing a contract approach in the UK – what we’re calling a retirement occupancy contract – will take time, but is entirely possible. The contract-based tenure model already exist in the form of licences to occupy, which would require only minor amendments to primary legislation.  

The crucial element would be achieving the right regulatory framework for consumer protection, as trust and sustainability are absolutely key to sector growth.  

“In contrast to the UK, countries with a more developed integrated retirement community sector have replaced a focus on property ‘ownership’ with a focus on the things that matter most to customers”

Interestingly, consumer research commissioned by ARCO found that while older homeowners value the security it provides, they also describe the burdens of homeownership. These include financial and legal responsibilities, uncertainty surrounding bills, and the fact that locking up the vast majority of their assets in property means they are left with low pension incomes. The contract-based approach to older people’s housing found in other countries addresses all of these.   

In the end, there’s no escaping the fact that other countries have simply done much better than the UK in growing their older people’s housing sector and making it accessible to the average household, without dialling back the support and services provided. 

Ministers like to describe the leasehold system as “medieval”. While the modern housing-with-care sector has grown using leasehold and found a way of working with tenure, it’s becoming increasingly clear to more and more people that adopting a flexible, modern, service-based contract model for integrated retirement communities would only have an upside for consumers and operators. 

Michael Voges, chief executive, ARCO