Last Time Buyer market could free up 20 years housing supply says new research from L&G and Cebr
L&G SETS OUT TEN STEPS TO UNLOCKING THE LTB MARKET
A new research report released today by Legal & General, together with the Centre for Economics and Business Research (Cebr), has quantified the size and shape of the UK’s "Last Time Buyer"¹ (LTB) market for the first time. In doing so, it has identified 5.3m under-occupied homes in the UK, with 3.3m of LTBs looking to downsize.
These last time buyers are sitting on the equivalent of 2.6m family homes, representing 10 years of housing supply based on Government targets or 20 years based on current housing completions. As such, the LTB market owns 7.7m spare bedrooms² and a total of £820 billion of housing wealth, set to reach £1.2 trillion in 2020. Almost a third (32%) of these older homeowners considered downsizing in the last five years; only 7% actually did.
Paul Stanworth, Managing Director of Legal & General Capital, said: "The Last Time Buyer market is an overlooked sector of the residential market. Given its scale and the receptiveness of this demographic to the possibilities of downsizing, it presents a powerful tool for addressing the housing supply issues this country faces. By failing to target this key demographic with good value, purpose-built housing for those aged 55+, Government and industry alike are missing an important trick."
The UK suffers from a chronic undersupply of age-specific housing. Demos, among others, has noted that only 2% of the UK's housing stock is retirement property, housing just 1% of the 14 million Britons in their 60s (compared with around 17% living in retirement accommodation in the US). All too often, this leads to older people living in homes that do not suit their needs, with moves often forced by circumstance rather than being a positive choice.
Bill Hughes, Managing Director of Real Assets, Legal & General Investment Management, commented: "Bringing about multi-faceted financial and social benefits, the provision of safer, well designed accommodation that meets the needs of older people would not only ease pressures on the health & social care system, but free up savings locked up in housing for other uses, boost the UK economy and bring significant wellbeing outcomes for older people."
¹ A Last-time buyer is a household which owns the property in which they live; where the head of the household (household reference person) is age 55+; where the home is under-occupied (has two or more unoccupied bedrooms); and where the household has expressed a preference to downsize their property at some time in the future.
² Based on an average of 2.3 unused bedrooms in LTB homes.
The critical barriers that older people identify are a lack of suitable accommodation, the cost of the available options and tax considerations. L&G’s ten steps to unblocking the LTB market are aimed at boosting the supply and diversity of options available to older people:
1. Political support: Government needs to focus on this issue and commit to supporting an expanded provision of age-specific housing to serve the needs of older people.
2. An integrated policy approach: Policy committees need to recognise that, when done well, retirement housing can connect residential infrastructure with the health & social care system, providing major benefits for both.
3. Diversity of tenures: The majority of retirement housing is sold to occupiers on a leasehold basis. Increased volumes of homes across all tenures, including freehold, shared equity and rented options, would allow the system to cater to a wider variety of needs and offer flexibility as people’s needs change in later life.
4. Greater supply in the mid-market: At the moment, provision of retirement housing is concentrated amongst affordable housing providers and a small number of premium private sector operators. This leaves much of the market relatively underprovided with good quality stock.
5. Urban not rural: LTBs require well designed, affordable space that is close to family, friends and facilities. This emphasis on connectivity and amenity suggests that the bulk of demand will be in urban rather than rural locations. Provision, and the public policy environment, must accommodate this.
6. Tax relief: We need to reduce transactional costs to incentivise right-sizing across the whole market.
7. Benefit consolidation: Retirement housing is influenced by a web of public sector subsidies, comprising housing benefit, social care support and health-related spending. Ensuring that these systems fit together in an understandable way to provide the right outcome should be a key policy consideration.
8. Planning policy: Attitudes to retirement housing vary widely across planning authorities. This leads to an unhelpful variety in terms of approaches used and the recognition of the benefits that expanded provision bring. Planning authorities should recognise the specific benefits of retirement housing and set targets for its delivery.
9. Development levies: Retirement housing is often treated harshly by the planning system. When schemes are treated in the same way as general needs housing, they are burdened by affordable housing / Section 106 / CIL obligations as well as the cost of providing common areas to give the amenity that older people want and deserve.
10. Equity release: If older homeowners do choose to remain in their existing homes, the potential economic gains of unlocking the current high levels of unproductive housing wealth in this market make a strong case for continued industry, government and regulatory efforts to develop the equity release market in the UK.
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NOTES TO EDITORS
The Legal & General Group, established in 1836, is one of the UK’s leading financial services companies. As at 30 June 2014, it was responsible for investing £467bn worldwide on behalf of investors, policyholders and shareholders.
The Group’s involvement in the UK property and infrastructure market is well-established and significant. As one of the largest UK property investors, with significant volumes of patient long-term capital under management, Legal & General has identified high quality housing stock as a key asset for society and wants to work with the Government, local authorities, housebuilders, social housing providers, charities and other specialist organisations to create more housing stock in the UK. As such, it continues to participate in a growing range of supply side housing activities, including financing affordable homes, the house building sector, urban regeneration, student accommodation and care homes.
Legal & General Capital was founded in 2013 to help actively invest L&G Group’s balance sheet, improving its shareholders’ returns by increasing the business’ exposure to direct investments. Identifying new institutional asset classes and long term macro trends, it has continued to make strong progress in the origination and development of the housing and urban regeneration asset classes. Through these investments it is able to take advantage of the strong returns that exist for long term forward thinking capital, whilst also enhancing L&Gs wider social impact and acting as a catalyst for UK economic growth. Currently managing £6.3bn in Group Capital funds (as at 31 March 2015),