The later living sector is facing a dramatic shift, as an ageing population brings a new customer base with very different needs and expectations. Ahead of the United Nations International Day of Older Persons, Guy Garnett explains why developers and operators should start preparing now.
People are living longer than ever before, with the number of over-75s in the UK expected to double in the next three decades.
Recent conversations we’ve had with leaders in the later living sector has revealed this is an urgent challenge. One developer has estimated that 85% of its current customers are from the silent generation. In five years, they predict that their entire customer base will be baby boomers.
This means that organisations in the sector need to start planning now to meet the very different needs of the upcoming generation of later living customers.
New requirements, higher expectations
The baby boomer generation are not “silent” like their predecessors. They are typically more informed, have higher expectations, and are more vocal about their wants and needs. They are often digitally savvy, well-travelled, and have more personal wealth. They are fitter and healthier than previous generations, living more modern and active lifestyles.
This means they are a harder customer base to deliver for. For example, they will often have a car each, so couples living together require more parking space. They are likely to be very involved with their local communities or families, caring for grandchildren and so requiring connectivity. They also have an increased interest in sustainability.
Their living arrangements need to reflect and enable these lifestyles. New developments being built now need to be designed with flexibility and amenities in mind, especially in communal areas. Customer service provision must be excellent to meet the high standards of the incoming customers.
Overcoming planning and finance challenges
Addressing such a dramatic change is easier said than done. Over the next decade, the fastest-growing demographic will be those over 80, increasing the need for later living properties. Meanwhile, the C2 sector is reducing by 16% annually as not fit for purpose care homes are closed.
Site acquisition is another barrier. For example, supermarkets will compete for the same sites, but are not hampered by Section 106 requirements or the community infrastructure levy. Local authorities have land that could be redeveloped and could help developers to overcome planning and site acquisition challenges. Partnering with housing associations who have land banks but lack development funds is another option.
Financing is also a hurdle. The broader residential sector is all chasing the same investment as later living. While the later living sector is relatively young, market segments such as PBSA and single or multi-family build-to-rent are more evolved and often seen as safer bets. Later living developments are also slow to reach full capacity, which delays the rate of return.
Traditional financial models have proved unpopular with both investors and customers. Exit fees, service charges, and deferred management fees can be confusing and deter investment, particularly from overseas.
Rethinking these models, and speeding up the rate of planning and construction, will help to improve the rate of return for investors and turn later living into a more attractive investment option.
Selling the benefits of later living
Convincing investors isn’t enough – potential customers must also be persuaded. Despite our ageing population, around nine million bedrooms are under-occupied in the UK later living sector.
This is largely because later living is needs-based. Many people stay in their family homes for as long as possible, only moving when they need to and often wishing they’d done it sooner. Some wait too long to benefit at all.
It’s therefore clear that the wider public needs education on later living options. Honor Barratt, the CEO of Birchgrove, suggests that “trying to open up to the public as much as possible is key.”
“There is still a complete lack of awareness by the public of what later living is. We shouldn’t underestimate the power of word of mouth, and people visiting friends in a later living setting to see the benefits for themselves.”
With baby boomers as the first retired generation active on social media, a targeted social media strategy is another opportunity to reach potential customers.
What does a modern later living approach look like?
Shane Paull, COO at McCarthy Stone, believes that developers should take their lead from current and future residents: “All businesses are trying to work out what an 80-year-old wants, but nobody running the businesses is 80 years old. More work needs to be done around understanding customer wants, focusing less on the product and more on lifestyle and quality of life.”
Expanding later living beyond care to wellbeing, and enabling an active, engaged, lifestyle is vital. Building vibrant internal communities can combat loneliness whilst still providing the security that homeowners want. Retirement Villages, for example, developed an integrated community in West Byfleet; apartments, shops, cafes, and restaurants were built around a pedestrianised public square, at the heart of plans for town centre regeneration.
Birchgrove’s scheme in Chiswick showcases how developments can integrate with and benefit the wider community. On the site of a former police station, it includes space for local groups and charities, and dedicated facilities space for the police, re-establishing a police presence on the local high street.
There is space in the sector for different operating models and financial options tailored to customer needs. Someone in their 80s may not want to buy a new property, so rental options are necessary. There is further potential to innovate with a rent-to-rent model, where customers could rent out their family home to cover the cost of renting a later living home, freeing up available housing for younger generations.
Partnering to build a stronger later living sector
No organisation can single-handedly solve these challenges. Collaboration is needed across the sector and between its leaders.
McCarthy Stone demonstrated how this collaboration can work by partnering with Anchor Hanover, a not-for-profit provider of later life specialist housing and care, to deliver “affordable for all” later living communities across England. It is also looking to partner with more care home operators on larger sites. More joint ventures like these could boost the sector’s output and significantly contribute to the UK’s target to build 1.5 million new homes.
Later living is facing a major transformation. By rapidly adapting new strategies and collaborating effectively, sector leaders can meet the evolving expectations of a changing demographic, creating vibrant, innovative developments and strengthen the UK’s housing supply by freeing up family homes for younger generations.
To find out more about finding the right person to lead your business through a major transformation, get in touch.