The retirement housing market is the Cinderella of the property development sector, largely ignored as an unsexy, mildly embarrassing necessity a million miles from its glossy, luxury apartment sisters.
It’s also been marred by scandal recently over the ‘event’ and exit fees and also ground rents levied by developers and freeholders on retirement leaseholders.
These problems became swept up into the government’s drive to reform the worst aspects of the housing market, and it recently decided to take action, particularly after an exhaustive Law Commission investigation laid it all bare.
In March this year Housing Secretary James Brokenshire promised to introduce new measures that would make entry, exit and running costs more transparent. Several developers including McCarthy & Stone and Churchill have signed a ‘good behaviour’ pledge.
And partly because of this scandal, along with other factors including Stamp Duty, the wheels have begun to come off the retirement property bandwagon.
Millions of older retirees are trapped in large houses that they cannot sell for the right price, or sell at all, and therefore the retirement housing industry is casting around for solutions as sales have become tougher.
One idea has been to switch to rental rather than sales, something McCarthy & Stone announced in April within its half-year results.
These are expected to be traditional rentals, but a more interesting and unexpected sub-market is also developing; luxury build-to-rent for retirement.
Several companies are involved including Hawthorns, which has developments in Braintree and Eastbourne, but perhaps the most interesting is Birchgrove, which describes itself as a ‘new model of assisted living accommodation and care for rent for the growing elderly population’.
It has completed its first development in Sidcup in Kent and is funded by Bridges Fund Management, an ethical investment fund backing 15 different residential and commercial sites and developers across the UK.
Birchgrove couldn’t be more different than mainstream build to rent developers, who usually insist on large sites and like to market themselves as providers of ‘cool’ communities to hang out and live in for younger urban renters.
Retirement build-to-rent tends to be smaller sites with fewer than 100 units and is designed for much older tenants; the average age of those moving in at Birchgrove’s initial development is 83.
Its Managing Director is also different. Honor Barratt, 46, is a former TV executive who made her name in on-screen promotions including a contract to create the official title sequence for the 2008 Beijing Olympics.
Her production company BDA Creative was bought by Octopus Investments in 2007, the fund behind Zoopla.
It had links to ethical financial group Bridges Fund Management and asked Honor, who completed an MBA at Insead in 2010, to get involved with launching Birchgrove.
It has completed its first site in Sidcup, Kent which is a 74-unit development and is constructing a second in Woking, Surrey due to be completed next year. A third is going through planning in Ewell, also in Surrey.
“Most of our residents come from a three-mile radius of the developments and this is a unique feature of retirement build-to-rent – older retirees don’t want to venture too far from their friends and families,” she says.
The company has ambitious plans and hopes to develop a further fives sites by 2023 and complete 600 units, at which point Bridges will probably exit its investment
Honor is likely to stick with the company, though. She admits to having been ‘bitten’ by the retirement bug and says she is aware that the industry is watching what Birchgrove is doing to see if they can make it work.
“Many of our target customers are in under-occupied homes and therefore if we can free up that housing stock then we’re helping solve a significant problem in the market at the moment,” she says
“The reason that there’s no real provision in this sector via build to rent is that the rest of the industry thinks we will never get 83 year olds to step off the housing ladder having spent their whole lives trying to cling on to it.
“I think it will work. Older people who may not have experience of buying and selling a home because their partner used to do it all look at the exit fees many retirement developers charge, and the effort required, and are put off.
“With Birchgrove, the idea is that they don’t have to sell their home – they can move in here for a couple of months and then try it and if they don’t like it move back.
“If they do like it, they can rent out their former home. The family are happy because the asset isn’t being spent on an expensive retirement housing purchase.”
Barratt reckons there is ‘massive’ under-provision of rental properties for retirees but the residents are often vulnerable and require round-the-clock care; Birchgrove’s initial development has 12 full time-staff including qualified medical 24-hour cover and a concierge.
The development also includes a restaurant, gym, concierge, treatment rooms and a hairdresser.
Rents at its developments are expensive. At Sidcup they start at £3,000 a month, three times the rate for a comparable apartment locally.
“We talk to them about affordability – living here needs to be funded through their pensions as well as their old home asset – there’s no point not being able to live here in ten years’ time,” she says.
In return for such high rents, Birchgrove also offers tenants assured rather than shorthold tenancies, which Barratt says she acknowledges the industry think the company is ‘mad’ to do.
“I think the only way we can persuade retirees to leave their family home is to give them almost the same level of security as they have in their house,” she says.
The obvious question to ask Honor is whether she will rent at one of her developments when she retires.
At 46-years-old she says that’s a long way off, somewhat evading the question, but points out that 20-year-olds who retire in 60 years’ time won’t have the massive property equity that retirees have at their disposal today, and that build-to-rent will become the mainstream solution for them in the future.