AHP0001

Written evidence submitted by McCarthy Stone

About McCarthy Stone

McCarthy Stone is the UK’s leading developer and manager of retirement communities, operating 487 developments, including 110 Extra Care schemes, for c.21,000 people mostly aged in their 80s. Alongside our independent, private apartments and bungalows and large shared areas within our developments, we deliver a range of support services, including c.40,000 hours of care and support per month for our residents. We open c.50 new developments a year and aim to further increase the supply of retirement housing across the UK. For all communities opened since 2010 we remain as the landlord and managing agent, looking after the wellbeing of our homeowners and managing our properties.

We offer two types of retirement schemes: housing with care and housing with support. Our housing with care, or Extra Care, developments (which we call Retirement Living PLUS) consist of apartments designed to high accessibility standards that support independent living, with a range of on-site communal facilities such as restaurants and wellbeing suites, plus on-site care and support teams, which are registered with and regulated by the CQC. Today they deliver more than one million meals a year and c.500,000 hours of care a year. They are a form of integrated retirement communities.

Our housing with support schemes (which we call Retirement Living) provide on-site support and property management services, helping vulnerable residents to live a better, more supported life. These developments include communal areas such as shared lounges, laundries, access to a House Manager, increased safety and security (such as door camera entry and a fire-detection system) and a 24-hour emergency-call out system.

Reason for submitting evidence

We are responding to this consultation as we believe offering more affordable retirement housing options, including shared ownership, with lower purchase prices will open up access to our products and services to older people with lower levels of affordability than would otherwise be possible. This will enable more older people with lower incomes and housing equity (c. £150k – £250k) to enjoy the proven health and well-being benefits that retirement communities deliver.

By opening access to high-quality retirement communities to around two million older people with equity levels in this range, McCarthy Stone will help deliver the Government’s ‘levelling up’ agenda, particularly in the North and Midlands. This will provide more older people with a diverse mix of specialist housing while also helping to create additional employment opportunities for local communities where we could not have previously built.

We believe there is now significant potential to expand a mid-market offer including shared ownership that is not currently being met. Improving Homes England’s Older Persons Shared Ownership (OPSO) scheme) would involve a small number of minor changes to improve viability, creating a scheme which would be more attractive to retirement developers and investors.

The take up of a mid-market offer for older people which includes shared ownership could be expanded further if the Government’s affordable shared ownership product for older people had more profile, along with additional funding to meet demand. At the moment we believe this option has very little public awareness or understanding due to its limited availability.

1. How the different phases of the programme are delivering new homes

Under the Affordable Homes Programme 2021-26, Homes England is committing almost £5.2bn in affordable housing grant to 31 strategic partnerships with 35 organisations. We are delighted that our shared ownership arm, McCarthy & Stone (Shared Ownership) Limited, has become a Regulated Provider and a Strategic Partner for Homes England, under the Affordable Homes Programme 2021 – 26, and will deliver 1,500 affordable shared ownership units over the next five years. The homes will be delivered through OPSO and will offer discounted purchases of between 10% to 75% of the property’s value.

This grant funding was the first investment in the private retirement sector ever made by Homes England, and forms part of our multi tenure strategy, which was launched in 2019, and already around a third of our transactions are for private rent or private shared ownership. Affordable shared ownership will complement this offer, and affordable retirement housing as a whole is essential to meet the Government’s wider levelling up agenda.

That being said, there is significant potential to do much more and help more older people with lower affordability if the scheme could be improved and expanded. This would involve a small number of minor changes to OPSO and the wider programme to improve viability, creating a scheme which would be more attractive to all retirement developers.

Our recommendations include:

• Revisions to the staircasing mechanism and grant repayment requirements to optimise the model. We believe one of the key reasons why OPSO has limited take up is because there is a conflict between the grant repayment provisions contained within the Capital Grant Fund General Determination and the principle of the OPSO product that offers customers who own a 75% equity share the benefit of paying no rent on the remaining 25% equity.

• Aligning the requirements for with profit providers with those for not-for-profit providers. One example of this is the end date for delivery under the programme. With profit providers must reach Practical Completion of all their units by 31 March 2026 but not for profit providers are only required to make a start on site by that date. In the case of McCarthy Stone (Shared Ownership) Limited a change to align with not-for-profit providers would in effect allow an additional up to two-year extension to the programme beyond March 2026. McCarthy Stone (Shared Ownership) Limited believe such a change could have the potential to allow them to deliver at least 1,000 additional affordable homes for older people under the 2021 -26 programme.

• Take up of a mid-market offer for older people which includes shared ownership could be expanded further if the affordable shared ownership product for older people had more profile, along with additional funding to meet demand.

• Changing the end date of the ‘for profit’ Affordable Homes Programme to align with the additional two-year extension beyond March 2026 given to non-profit providers.

• While not part of the OPSO scheme, the current Strategic Partnership with McCarthy Stone (Shared Ownership) Limited only allows them to deliver 10% of the 1,500 affordable shared ownership units as core stock. McCarthy Stone (Shared Ownership) Limited have the potential to increase this amount further by acquiring more existing core stock if these regulations could be amended.

We recognise some of these OPSO recommendations are quite specific, but they have great potential to extend the good work of Homes England and provide a high quality, affordable homeownership offering to thousands of older people looking to move into retirement communities, with all of the benefits this brings.

We would also like to see additional funding for the OPSO scheme to meet demand. Improving the OPSO scheme would involve a small number of minor changes to improve viability, creating a scheme which would be more attractive to all retirement developers.

2. Whether the programme aligns with other cross-government initiatives

We welcomed the announcement of the older people’s housing taskforce in the Levelling Up White Paper and it is something that we have long called for to address the existing barriers that limit the development of specialist homes for older people. The OPSO scheme and the increased availability of affordable housing for older people does fit with what we imagine the aims of the taskforce will be. We believe that the taskforce will be crucial to the Government delivering on its commitment to make ‘every decision about care, a decision about housing’[1].

However, as well as our proposals for how OPSO may work better as a scheme, we have specific proposals for what we believe the taskforce should cover. Crucially, we would like to see Homes England play a key role in leading its work. Our recommendations for the taskforce are as follows:

• A bold and ambitious planning framework for increasing the supply of specialist homes for older people to 30,000 a year, or 10% of overall housing supply, which could be delivered through changes to the NPPF or through a Ministerial statement, rather than primary legislation. This should include:
• A 10% target for all new housing supply to be specifically for older people
• A requirement for local authorities to plan for retirement housing in Local Plans
• A requirement to assess the need for retirement housing in local housing needs assessments
• An exemption for retirement housing from affordable housing and CIL requirements to resolve existing viability restraints

• This target could also be expanded to Homes England, which would see 10% of its annual housing delivery in future being specialist housing for older people, rather than the current target which is 10% of Homes England supply being for supported or specialist housing.

• An exemption from stamp duty for retirement housing, given their wider socio-economic benefits.

• The development of an agreed set of definitions for the retirement industry to use, to improve consumer understanding and awareness.

• The development of a kite mark or new code of conduct for all specialist homes for older people that helps increase consumer confidence in the retirement sector. This could cover standards around design, sales and services, and could become a requirement for accessing grant funding.

September 2022