Retirement flats – the big con

Tens of thousands of families have seen their inheritances decimated after elderly relatives paid inflated prices for new retirement homes that have collapsed in value, an investigation by The Times has found. Prices of retirement flats in developments built by some of Britain’s biggest housebuilders have plummeted by up to 90 per cent in the face of costly annual management charges and ground rents.

Analysis of Land Registry data suggests that £3 billion could have been wiped from the value of retirement homes built between 2001 and 2015. In one case, a flat bought for £197,000 in 2009 from builder McCarthy & Stone, a FTSE 250 company, was sold for only £26,000six years later. The owner, Miriam Savage, was paying £8,200 a year in service charges and ground rent to the managing agent.

The losses often become apparent to families only when their loved ones die and they try to sell their home. There are 150,000 retirement flats in the UK. They don’t have full-time nurses but most have communal areas and features to help residents live independently. There is often 24-hour telephone support or wardens on site.

The properties are sold as leaseholds with the freeholds bought by the highest bidder. The freeholder collects an annual ground rent and appoints an agent to run the development. These companies have been accused of levying excessive fees and charges and leaving facilities to fall into disrepair.

Sebastian O’Kelly, of betterretirementhousing.com, said: “These flats routinely plummet in value and the reason is the leasehold system. The freeholder and property manager still get their ground rent and service fees irrespective of price. It’s deplorable that families are pouring money into these purchases, often in desperation, only to see their value evaporate.”

Retirement home builders say the value of the properties is not just financial. They say they reduce loneliness and the burden of maintenance and increase safety and security. McCarthy & Stone points out that since 2010 it has not allowed outside companies to manage its sites and this is protecting values.

Some families have concerns about how properties are sold. One complained that a 88-year-old relative was sold a flat while her daughter was on holiday. When the woman died, the flat wouldn’t sell. Land Registry data shows the average loss of value for flats in the block is £74,000.

The Times looked at nearly 500 retirement flats in 15 developments built between 2001 and 2015. Almost 80 per cent of the homes sold since their first purchase had fallen in value with an average loss of £38,846. The analysis suggests that flats built since 2010 have fared better with only 37 per cent experiencing losses. But one McCarthy & Stone flat built in 2015 lost £45,000 in value when it was sold this year. In the past four years McCarthy & Stone has made profits of £383 million.

Mr O’Kelly said: “The situation may be improving as builders move to being service providers but these companies successfully lobbied government to retain ground rents on retirement sites, which doesn’t encourage the belief they have a long-term interest.”

This week Churchill Retirement Homes donated £150,000 to the Tories. The company is run by Spencer and Clinton McCarthy, the sons of John McCarthy, the co-founder of McCarthy & Stone. There is no suggestion that the donation was linked to the decision to exempt retirement home providers from a ban on ground rents. Spencer and Clinton McCarthy have been Tory supporters for ten years.

The industry says the sale of freeholds funds communal areas and without this system flats would cost more.

Sources at McCarthy & Stone insist it is a different company to the one that developed homes pre-2010. FirstPort is responsible for maintaining the developments built before 2010. It said that nine out of 10 customers say its properties improve their quality of life. It added: “Independent research by the Elderly Accommodation Counsel in 2019 found that new retirement properties typically increase in value. The vast majority of our managed properties increase in price on resale and they are more than just places to live.”

“The billionaire and the 219 tiny flats: a new low for rabbit-hutch Britain?”

“Campaigners have piled in to criticise plans drawn up by a billionaire property tycoon to cram more than 200 tiny flats into an office building in north London. They describe it as a “human warehouse” that would be filled with people living in “cramped single-occupancy shoeboxes” like “rabbits in hutches”.

Amid claims that some of the planned flats would be as small as 15 sq metres – that’s less than 13ft by 13ft for residents’ entire living space – some locals say the proposal is one of the most shocking examples yet of the phenomenon known as office-to-residential conversion. A typical Premier Inn hotel room is 21 sq metres, while national space standards state that the minimum floor area for a new one-bedroom one-person home is 37 sq metres.

It was 10 years ago that, while London mayor, Boris Johnson pledged an end to “hobbit” homes in the capital, but examples of rabbit-hutch developments keep coming, and one leading architect told Guardian Money: “We’re heading towards the so-called ‘coffin homes’ in Hong Kong.” …”

https://www.theguardian.com/money/2019/nov/23/the-billionaire-and-the-219-tiny-flats-a-new-low-for-rabbit-hutch-britain?CMP=Share_iOSApp_Other

More Tory fake news – this time on housing policy

The Sun has this headline:

“Labour in La La Land

Jeremy Corbyn will force Brits to sell land at a fraction of the price so he can go on huge housebuilding drive’

https://www.thesun.co.uk/news/10389467/corbyn-seize-property-housebuilding-drive/

The reality:

Labour’s plan is for land to be sold to councils and developers at its value BEFORE planning permission can be applied for rather than as, at present, being sold AFTER planning permission has been granted.

That won’t please East Devon Green Party candidate Henry Gent, who currently stands to make millions of pounds on the option he has given to Persimmon to build hundreds of houses on his farm land.

If Corbyn gets his way, he would get only the agricultural value of the land – making it significantly cheaper to build houses.

They published their ideas in June 2019:

https://labour.org.uk/wp-content/uploads/2019/06/12081_19-Land-for-the-Many.pdf

Kicked-out Tory Oliver Letwin understood the problem, but stopped short of offering a solution:

“Under the 1961 Land Compensation Act, councils are not permitted to buy agricultural land at its current value; instead they must pay a speculative “hope value”, based on the value of the land with permission to develop the site. That can easily make land more than 100 times more expensive than its actual worth. In his review of build-out rates (the report about the problem of land-banking that concluded that land-banking wasn’t a problem…), Oliver Letwin suggested that the residual land value of large sites should be capped at about 10 times their existing use value. Clearly better than paying 100 times the value – but does it go far enough?”

https://www.bdonline.co.uk/opinion/its-not-just-labour-thats-getting-behind-a-land-value-tax-/5099426.article

So this is both fake news and OLD news!

“Housebuilding data shows dearth of homes for affordable renting”

“The number of new homes classed as social housing and available at the cheapest rents from councils remained historically low at a mere 6,287, the second-lowest level in peacetime since council house building began in earnest in 1921.

The shortfall in new affordable homes is likely to fuel householders’ reliance on the private rental market. New research also published on Wednesday showed such housing is almost completely unaffordable in many areas for people who rely on housing benefit, which has been frozen since 2016.

In a third of areas of England fewer than 10% of homes are now affordable to welfare recipients, according to a study by the Chartered Institute of Housing and the homelessness charity Crisis. That meant increasing numbers of people were being pushed into homelessness or forced to live in emergency or temporary accommodation, the charity said. …”

https://www.theguardian.com/society/2019/nov/20/housebuilding-data-shows-dearth-of-homes-for-affordable-renting?CMP=Share_iOSApp_Other

PegasusLife service charges

PegasusLife now own the former EDDC HQ site in Sidmouth. A comment from the Guardian on the poor value of their retirement flats:

“.. you might be interested to know that another of these retirement property firms (Oaktree Capital-owned Pegasus Life) has just jacked up its monthly fees by around 50%. They did this around a fortnight before a relative of mine was due to move into a new build scheme, which is about a year behind schedule. Her monthly fees (for a one-bed flat costing ~£500k) were set to go from £600 to around £900. Absolutely outrageous.”

https://www.theguardian.com/money/2019/nov/16/flat-retirement-builder-value-mccarthy-stone?CMP=Share_iOSApp_Other

Record number of adults living with parents

“Record numbers of young adults in their 20s and 30s are living with their parents, according to official figures, with critics blaming soaring house prices and rents.

The Office for National Statistics (ONS) said that over the last two decades, there has been a 46% increase in the number of young people aged 20-34 living with their parents. Over the same period, average house prices have tripled from about £97,000 to £288,000.

In total, 1.1 million more young men and women are now living at home, with the number increasing from 2.4 million in 1999 to 3.5 million in 2019. …”

https://www.theguardian.com/uk-news/2019/nov/15/record-numbers-of-young-adults-in-uk-living-with-parents?CMP=Share_iOSApp_Other

Urban sprawl – Greater Exeter, Lesser East Devon

From a correspondent:

This correspondent had a beautiful sunny autumn drive through the villages of West Hill and Woodbury yesterday morning. Then the enthusiasm of conservative Cllr Philip Skinner for a “network of linked villages being built in the North West Quadrant area of East Devon” came to mind.

Has not East Devon sacrificed enough Grade 1 agricultural land to build Cranbrook? Were we not told that this sacrifice would be EDDC’s contribution to housing need?

Then we found that Ottery St. Mary was sacrificed.

Feniton was sacrificed.

Exmouth was sacrificed. I could go on.

And now we are told the villages of Poltimore, Huxham, Clyst St Mary, Clyst St George, Ebford, West Hill, Woodbury​, Woodbury Salterton, Exton and Farringdon would be most likely to be sacrificed.

Has the ward councillors of the above villages consulted their constituents? Are the constituents of Ben Ingham and Geoff Jung happy that Woodbury will join Cllr. Skinner’s “bigger vision”?

Why aren’t our independent councillors telling Exeter that East Devon has done their bit, they do not wish urban sprawl and it is now the other surrounding councils turn?