HOUSING BLOG WEEK. Nigel Wilson: Housing That Works For All Generations

Nigel Wilson, CEO of Legal & General, analyses the sticking points in the current housing market, and puts forward a refreshingly concrete plan to rectify them – by helping older generations to “rightsize”

Our dysfunctional housing market is one of the most obvious aspects of intergenerational unfairness – and of course we need more housing, at sensible prices and across all forms of tenure, for younger people.

But increasing housing supply for the first-time buyers only tackles part of the problem: we also need more, and better, property for retired people. By making rightsizing a more attractive financial and lifestyle choice for retired people, we can make more properties available for subsequent generations.

The right supply-side reforms, could deliver a genuinely multi-generational, inter-generational, housing policy but, so far, policy-makers and businesses have almost totally failed to deliver on this.

So here are five facts that illustrate the scale of the issue and five policy proposals which could help.

Five Issues We Face

• Research from the think-tank Demos and others shows that the over-60s have around £1.3 trillion of housing equity. Surveys tell us that at least a third of the people in this category want to downsize, but the right choices aren’t available. Their capital remains trapped, and this housing remains unavailable for younger people.

• If just half of the over-60s interested in moving were able to move, this would release around £350 billion of property – over half of it family-sized three- and four-bedroom homes. Currently, around 8 million homes across the UK have two or more empty bedrooms – a fact the Intergenerational Foundation has usefully publicised.

• And yet we are not building retirement properties – they still account for only about 2% of the UK’s housing stock. 110,000 properties have been built for sale to an over-65 population of 11 million, and with an ageing population the problem will only get worse unless we build.

• Care costs will increasingly have to be met from housing equity. As a country, we struggle to save enough for retirement, let alone the additional cost of care in old age. Funding care costs (even with Andrew Dilnot’s proposed cap on medical costs) is beyond the reach of many whose main asset is their house rather than other savings. This will require a bigger, better-functioning equity release or lifetime mortgage market.

• We badly need a more joined-up policy approach across housing, planning, health and social care. Too many planners dislike retirement villages because they worry about an older local population driving up the Council’s potential social care costs. But well-designed retirement accommodation prolongs independent living and can actually save costs, including for the NHS, which too often becomes the accommodation of last resort for the very old. The state saves £30,000 for every year that a person can delay going into state-funded residential care.

Five Policy Proposals

• Build more tailored accommodation that works for retired people: a five-fold increase would be a modest start. Research tells us this will increasingly be in urban areas where residents can be near the “Three F’s” – Family, Friends and Facilities. This should be a priority use for underused brownfield sites owned by government or NHS Trusts.

• Retirement villages and the broader housing needs of an ageing population must be baked into councils’ mid- and long-term planning. Student accommodation is in many ways a good template, where Legal & General has invested over £1bn in multiple sites to provide over 17,000 student beds up and down the country. What planners have found is that bringing student populations into city centres has provided a boost to the local economy and helped turn multiple-occupancy bedsits in the suburbs into higher-quality properties for families. Retirement villages could have an equally positive economic effect, but while it is relatively straightforward to secure planning approvals for student accommodation, it remains much harder for retirement villages.

• We need planners and local authorities to adopt imaginative solutions to help put long-term (30 years or more) institutional money to work on available sites and projects. There has never been so much long-term money available to invest in physical assets including housing, but we seem to still operate on a planning and economic model of small-scale, piecemeal development where land price matters disproportionately. New economic models can get over this, and modular building can speed up construction, but we need to be bold on both counts.

• Even where older people don’t want to physically move or rightsize their accommodation, they need to be able to free up trapped housing capital and put money to work in the broader economy. This requires an improved equity release or lifetime mortgage market. This is growing: Legal & General has just entered the market with the purchase of Newlife Home Finance, but consumer costs could be lowered if the government were to follow the US example and support the customer’s important “No Negative Equity Guarantee”.

• To deliver this, there needs to be a national strategy to reconnect housing, planning, health and social care for older people. If necessary, this should be headed by a government minister. Specifically, it needs to use housing solutions to reduce the likelihood that population ageing forces our NHS to become, by default, a provider of accommodation rather than of medical care and treatment.

Intergenerational fairness requires us to tackle these issues urgently. We must do more for the young, of course. But we also need to help the old make space at the congested “top of the ladder” so the positive effects can be felt by all, across the generations.