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Accommodating an aging population in a supply crisis

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Andrew Fyfe, Associate Director of Health and Senior Life at BNP Paribas Real Estate, outlines the challenges of accommodating an aging population in a senior housing crisis

Our recent findings from BNP Paribas Real Estate suggest that to meet the demand for senior housing in line with other developed countries, such as Australia, New Zealand and the United States, we need to build more than 487 000 retirement living units based on current demographic statistics. This does not take into account projected growth in the elderly population, with estimates suggesting the over-65 population is set to grow by 31% over the next 15 years, highlighting this as a problem. which will get significantly worse if not addressed now.

Why don’t we build more housing for seniors?

At the macro level, the retirement home sector is experiencing similar headwinds that affect all real estate sectors. The war in Ukraine, Covid-19 and rising inflation have all contributed to a rise in the cost of building materials, impacting the viability of some projects. The difficult macroeconomic conditions have increased the cost of debt, which puts more pressure on operators and developers in the sector as it makes projects more difficult to accumulate financially. This is especially the case in low value areas.

Changes in government personnel and policies (13 housing ministers since 2010) have also had a significant effect. ARCO, the professional body for residences for the elderly, succeeded in obtaining from the government the creation of the working group on accommodation with care as part of its upgrading program to promote the sector of residences for people elderly, working group chaired by the Minister for Housing. The new administration has recently confirmed that this mission will no longer be part of the remit of the minister of housing. This issue needs to be resolved as soon as possible to ensure that the momentum gained is not lost.

Clearer perceptions of senior housing

The perception of what is meant by “housing for the elderly” is a huge problem, because many people – consumers, local authorities, etc.

Nursing homes welcome people who need ongoing care and support, including people with dementia. Integrated retirement communities offer seniors a choice of lifestyle and the opportunity to live independently in a place where they can only use care facilities when needed. Seniors’ residences are residential accommodation for seniors with shared facilities and support. It is therefore essential that the government helps to make people aware of the differences so that they can make informed choices. In New Zealand, where the market is much more established, the general population understands the differences and will then consider different brands or offers.

In the midst of a housing crisis, the elderly are often placed at the back of the line. Most incentives are at the beginning of the housing ladder, and purchase assistance programs typically target first-time buyers.

In the face of a rapidly aging population, questions remain as to whether this makes sense. If we build more suitable housing stock to accommodate the elderly – an intermediate solution between ordinary housing and a retirement home – this, in turn, would have the effect of freeing up a supply of ordinary family housing, which would have a positive effect throughout the housing chain.

It is important to consider that inflationary pressures also have an impact on the consumer, as well as on the developers of housing for the elderly. Interestingly, 48% of over-66s surveyed for Strutt & Parker’s Housing Futures report said they would rather rent their next home. With the cost of living rising, it might be time to start looking more seriously at a rental product for seniors. The investment community understands that a rental product generates a visible revenue stream and, based on Strutt & Parker’s findings, perhaps a significant portion of seniors would also like the option of renting.

What is clear is that a mix of products at a variety of price points, specifications and durations is needed. A top-down approach will help alleviate the housing challenges of an aging population. The government must address this as a major problem, and targets should be set at national and local levels to provide more senior housing if we have any hope of providing nearly the number of senior housing required.

Andrew Fyfe

Andrew_Fyfe
Andrew Fyfe

Associate Director of Senior Health and Residence

BNP Paribas Real Estate

Tel: +44 (0)131 516 2975

www.realestate.bnpparibas.co.uk

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