This is a continuation in the series of posts about a new form of Community Retirement Villages. It follows on from my introductory post on 9 September. This post will focus on the most difficult question, which if how they can be financed in revenue and capital terms.
It is first with repeating some home truths, which successive Governments have failed to address :-
- Increased longevity and improved health care have outpaced the Governments ability to pay for later life support for older people. Over the years an expectation has been created that all health care is free from the NHS — this is no longer the case. Neither is it realistic to assume that social care will freely be available for all those who need it.
- Older people themselves, not knowing they were going to live so long in retirement, have not saved enough to pay for a good later life. Except that many of them are home owners and have lived through a period of house price inflation, so now have resources locked up in their houses.
- Until these two issues are faced up to by both Governments, who are afraid to be honest for fear of losing votes and by older people, who are hoping to hang on to a legacy, there will be no release of resources to address the problem.
Innovative financial models are the key to opening up new opportunities in the retirement housing and care market. Fluid use of housing capital assets and risk sharing to procure care-for-life reinsurance hold the answer. They are ideas that have been widely used in the USA, but have only rarely been offered in the U.K. :-
- down- sizing is the simplest option for releasing capital from your home, but it is only available if your home is of sufficient value. Shared-ownership needs to be an option for those with lower value homes.
- in both instances people may subsequently need to release more equity in their home to be able to fund care at a later stage.
- Ideally, when purchasing a new retirement home you want also to know you have your life time care needs can be funded. One option is to pay a non-returnable premium to move in to a new apartment which offers a care-for-life package. In the USA this is often called a Continuing Care Community.
The broad concept is that you buy into a retirement community which offers you housing and care for the rest of your life in exchange for a one time payment. The risks of how long you live and your future care needs are bourne by the retirement village operator. There has to be a caveat that if your care needs, particularly in terms of mental health require specialist treatment, you may need to move to another home, but this will continue to be funded by the village operator.
This approach was tested nearly twenty years ago by Rowntree in New Earswick Retirement Village in York, but sadly, it was not replicated because of the perceived risk. More recently The ExtraCare Charitable Trust launched a Care-for-life option on a limited basis, but again it has not been repeated.
It is an option that is completely different to the oughtright sale or even part purchase of properties. For that reason it would need an open and transparent approach and very careful marketing. It has the potential to give access to a Retirement Village at a price which is lower than the open market value of the accommodation, with no on going high service charges. The other big benefit is that you do not have to worry about the cost of your future care, as that is included in the initial entry price you pay.
After I have covered the other issue of Operational Management, I will bring together all the threads of my posts on Retirement Villages to try to point to a bold way forward.