ARCO (Associated Retirement Community Operators) – Written evidence (INQ0085)

The Associated Retirement Community Operators (ARCO) is the main body representing both the private and not-for-profit Retirement Community sector in the UK.

Retirement Communities deliver significant benefits for older people and wider society, by providing aspirational and enabling accommodation, facilities and on-site care and support.

However significant change is needed to realise the potential of our sector and ensure that all older people in the UK have the opportunity to live in a Retirement Community, if they wish, and to deliver the benefits of our sector’s growth to wider society.

Retirement Communities represent an innovation in business models and delivery which is currently being held back by the inability of UK regulation and legislations to adapt so as to reassure consumers about their rights and to give investors certainty about the legal framework they will be working within.

In addition, Retirement Communities have the potential to play a significant role in fostering technological advances because their long-term operational business models make it more economic to invest in new and emerging technologies in contrast to more traditional models of older people’s housing in which this is not the case.

An additional advantage of Retirement Communities is that because of features such as 24-hour staffing and high levels of community engagement and activity onsite there is much less of a risk of increased use of technology leading to social isolation for older people.

Background: Our Ageing Population and Retirement Communities

Retirement Communities combine high quality housing options for older people with tailored support services. They allow residents to rent or own a property and to maintain their privacy and independence, with the reassurance of 24-hour on-site staff and optional care and support as needed. Retirement Communities also feature a range of facilities including a restaurant or café usually alongside leisure and wellness facilities such as gyms, hairdressers, activity rooms, residents’ lounges and gardens.

Around 74,750 older people in the UK live in approximately 57,500 Retirement Community units. Of these, 30,800 older people live within 23,710 ARCO registered units across 338 Retirement Community schemes.

ARCO’s members use long-term business models that go beyond traditional housebuilding, creating operational businesses and schemes that provide housing, care, hospitality and wellbeing services for our ageing population. As a condition of membership, all ARCO Members sign up to a robust standards and compliance framework which includes external assessments against the ARCO Consumer Code.

The UK is world leading in our efforts to bring the benefits of Retirement Community living to our older population with moderate means - 60% of Retirement Community properties in the UK are for affordable or social rent.

However, we fall far short of provision for all older people across the UK with only 0.6% of people over 65 living in Retirement Communities in the UK compared to around 5% in countries such as New Zealand, Australia and the US. This is due to a lack of supply, not demand with our members often reporting long-waiting lists for their developments and significant interest from local authorities in additional spaces.

With the number of people aged over 65 expected to rise by more than 40% in the next 17 years to over 16 million, the under provision of accommodation which meets older people’s housing and care needs will become more acute.

Benefits of Retirement Communities

Retirement Communities enable more effective and cost-efficient delivery of health and care, saving money for private payers and the public purse. The cost of providing lower level social care in a Retirement Community has been found to be £1,222 (17.8%) less per person per year than providing the same level of care in the wider community. The cost of providing higher level social care has been found to be £4,556 (26%) less per person per year.[1] NHS costs reduce by 38% for those moving into Retirement Communities, an average saving of £1,114.94 per person per year. This relates to GP visits, nurse visits, and hospital visits. Costs for ‘frail’ residents can fall by 51.5% after 12 months [2]. Residents in Retirement Communities are less likely to enter hospital, and likely to spend less time there,[3] reducing unplanned stays from 8-14 days to 1-2 days [4].

Retirement Communities have also been found to enhance the wellbeing of older people. For example, our member’s developments have been found to significantly reduce social isolation and loneliness in older people, with only 1% of residents often feeling isolated [5].

Retirement Communities can provide great housing for older people and help free-up larger houses for those that need them. When an older person moves into a Retirement Community unit, they typically move from a larger, under occupied house thereby releasing bedrooms. 76% percent of residents released at least one bedroom when they moved to an ARCO Retirement Community, with an overall average of 1.25 bedrooms released. Retirement Communities are also often built at higher densities than family homes. For example, Earlsdon Park Retirement Village in Coventry features 262 apartments on 1.13 hectares. Building the same number of family houses would require around 6.4 hectares.[6]

Retirement Communities are a significant benefit to our economy. Over the next ten years Retirement Community operators are set to invest over £40bn and turning over in excess of £70bn. In addition, each new Retirement Community of around 250 units creates approximately 63 permanent jobs in areas such as housing management, care, grounds maintenance, leisure and retail, domestic services, and marketing and sales. This is a ratio of 1 permanent job created for every 4 units built.[7] For every 50,000 homes built, approximately 75,000 direct construction related jobs are supported.[8]

Retirement Communities are innovators held back by inappropriate regulation

Retirement Communities operate within a policy framework devised in 1987 when our sector was in its infancy and when care provision for older people was vastly different. At that point Geriatric Hospitals played a significant role in providing for more frail older people, whilst care homes were able to specialise more in providing for people with more moderate care needs.

Since then the increasing pressure of an ageing population, changing NHS practices and funding pressure on providers has led to the disappearance of Geriatric Hospitals and to care homes increasingly focussing on very frail older people, or those with dementia. Retirement Communities have played a key role in increasing provision for older people with more moderate needs.

Despite this the Retirement Community sector has no specific regulation or legislation whatsoever. Instead, residents and operators have to navigate over 120 pieces of legislation and regulation – resulting in considerable confusion in the planning system, amongst social care funders, amongst care regulators and in other relevant areas. In addition there is huge potential for consumer detriment which is certain to increase as the sector grows at pace over the coming decade.

ARCO is in part plugging the gap through a system of voluntary self-regulation amongst its members – but we have been informed by many of our sector’s largest investors that they would invest further if there was greater legal certainty.

Retirement Communities as innovation hubs

Because Retirement Communities are long-term operations, built and operated by the same company with a view to a long-term return rather than a short-term development profit, the financial incentives for the industry are fundamentally different to their traditional alternatives, and more conducive to technological innovation.

As operators of Retirement Communities depend on operational income, not just development income it is in their interests to invest in technologies which will deliver long-term cost savings notwithstanding their upfront cost. In addition, Retirement Community operators depend on healthy resale values of units in their developments in order to make their financial models work (as an “exit fee” or deferred fee is often agreed as part of the pricing structure to help subsidise the services received by residents when they live there.)

This means that the latest technological advances, particularly in care provision (eg robotics, care alarm systems and monitoring systems) are more likely to be present in Retirement Communities than elsewhere. In many cases this is formalised through ongoing relationships and tie-ins with cutting-edge innovators and developers. An example of this is the relationship which many of our members have with Bristol Robotics.

Retirement Communities also represent a safe and reassuring test-bed for new technologies. They have 24-hour onsite staffing, meaning that any complications arising from the new technologies can be ironed out with staff support. They also have strong social and community elements – meaning that increase use of technology will not lead to growing social isolation – and can instead support continued independence and engagement.

Recommendation

Retirement Communities are an innovation which cuts across the remits of several Government Departments – DHSC, DWP, BEIS, MHCLG and HMT amongst others. As such the regulations applying to our sector are rarely considered in the round and the opportunity to grow provision is not given the level of attention it should have. As such the Committee should recommend that a cross-Government task force be set up to consider how the sector can grow and continue to innovate, whilst also ensuring that the rights of consumers are protected and that the responsibilities of investors are clear.

7 February 2020

[6] Providing 262 family homes would require 6.4 hectares of land, at a generous average of 41 homes per hectare (density for average residential housing in England). Source: CABE. Better Neighbourhoods: Making Higher Densities Work http://www.mae.co.uk/assets/pdfs/better-neighbourhoods.pdf p. 6

[7] The ratio of units to permanent jobs submitted from ARCO members ranged from 1:1 jobs to units to 1:5 jobs to units – with economies of scale observable for larger operators.