‘Last-time buyers’ need help to downsize

Everyone wants to help first-time buyers. Numbers of new property owners have reached a 12-year high as the government grants stamp duty holidays and equity loans via the Help to Buy scheme — and the Bank of Mum and Dad has been busy funding deposits.

But a new report boldly argues that housing policy needs to focus on “last-time buyers” to stand a chance of solving the UK’s housing crisis.

Professor Les Mayhew of the Cass Business School believes the key to this is encouraging homeowners in their 50s and 60s to “downsize”, moving out of their family-sized homes to make way for the next generation.

In his report, recently published by the Centre for Study of Financial Innovation, he identifies the UK’s “under-occupation problem”. Older people are not moving out of houses that are too large for their needs, due to the costs of downsizing and a lack of suitable properties. And as the population ages, the impact is going to increase.

“Tackling this issue should be hoisted much higher up the housing policy agenda,” says Prof Mayhew. “By far the biggest increase in housing need will come from elderly couples or people living alone. Without suitable accommodation for them to ‘downsize’ into, they will continue to stay put in family homes. This, in turn, constricts opportunities for young families and first-time buyers.”

Rising longevity means that people aged 65 today can expect to live another 23 years. There are 11.6m people of retirement age now, but this is forecast to grow to 17.4m by 2040 — a faster rate of increase than for other age groups.

The number of older people living alone is forecast to increase to 11m by 2040, including 1.9m people over the age of 85.

At the same time, there is a shortage of suitable properties for people aged over-55 wishing to downsize. This had led to an increase in under-occupied properties and a shortage of full-sized homes for young families.

Prof Mayhew advocates tax incentives for older people to downsize and a targeted housebuilding policy.

A taxing question

Older property owners are likely to have built up considerable equity in their homes, so targeting a tax break at “last-time buyers” could prove controversial. But considering the impact on the overall housing market, Prof Mayhew is surprised the tax incentive to encourage older people living alone in large properties to move has not been considered.

Currently, the taxes and fees involved in moving to a smaller property often make it cheaper to stay put.

While first-time buyers pay no stamp duty on properties valued up to £300,000, older people wanting to move to a three-bedroom apartment in a popular area could pay tens of thousands. They also face selling and removal costs.

Prof Mayhew says there is no incentive for older people to give up their family homes — even if the right properties to downsize to were available.

“In truth, the main reason most people don’t move into smaller properties in later life is that there is a chronic shortage of suitable and desirable alternatives — and a lack of support to make a move,” says Dr Rachel Docking of the Centre for Ageing Better (CfAB).

“A tax break is no good if there’s nowhere within 30 miles that you could actually live in. Our ageing population has exposed the shortage of diverse housing options that are suitable for people as they grow older.”

Prof Mayhew argues that the types of homes being built must be better aligned with demand, which is increasingly dictated by the needs of an ageing society.

The supply of properties suitable for older people is falling behind demand, but housebuilders are unwilling to switch their emphasis from first-time to last-time buyers.

Sue Hayes of Aldermore Bank says lenders are responding to the needs of the “last-time buyer” as there are now 1,000 mortgage products available to those aged 80 or over. Housebuilders need to become more diverse and serve the older market better, she argues.

While young professionals are happy to live in small apartments because they are out all day, older people want more space. Yet accessibility is as important for parents with young children as it is for older people or those with a disability, reducing the need for older people to move in later life.

The mismatch is also highlighted in other research findings. According to the English House Survey, just 7 per cent of UK homes meet basic accessibility standards. A report commissioned by the Centre for Ageing Better (CfAB) found that 72 per cent of UK adults thought that all new homes should be built to suit occupants of all ages and abilities. Among the over-65s, nearly half worried about the prospect of struggling with everyday activities such as cooking or bathing.

Dr Anna Dixon, chief executive of the CfAB, said: “There is a big market for homes that everyone can live in, regardless of their age or ability. Our research shows a strong public appetite for age-proof homes which enable people to live active and fulfilling lives — whatever their situation.”