Later living and care
Let’s start with the good news: Knight Frank’s 2023 UK Care Homes Trading Performance Review states that occupancy levels in UK care homes sector have continued to increase, growing by 3% with several operators now trading at pre- pandemic levels.
It also reports that occupancy rates are up to 86.4% and that operators are seeing increased demand for beds. Average weekly fees are increasing by 9.6% to £1,074 per week against a backdrop of inflation, which is abating.
The October 2023 deadline for an adult social care cap of £86,000 has been pushed back by the government until October 2025. While this gives local authorities more time to plan, it risks introducing further uncertainty in the sector.
Sector-wide EBITDARM (earnings before interest, taxes, depreciation, amortization, rent, and management fees) has gone down slightly to 25%, showing the issues facing the industry as it seeks to maintain profitability.
Although there are challenges relating to profitability, the rising demand for beds augurs well for the future. Current projections suggest a near doubling of demand for beds by 2050. However, supply is failing to keep pace with demand and capacity could be reached by the end of the decade if new homes are not built.
There are further proposed changes in relation to the lease model for Integrated Retirement Communities (IRCs). The good news is that the government is committed to removing hidden event fees, but has not legislated for it yet. The Leasehold Reform (Ground Rent) Act 2022 also saw the abolition of ground rent fees in long-term residential leases. This has forced developers to change their existing leasehold structure, as ground rents have been a means to recoup costs for constructing enhanced community spaces. This may require the use of deferred fees, increased management fees or other means to recoup the loss.
The sector will also be affected by many of the same issues facing the development industry more widely. These include biodiversity net gain, the recent amendments to the NPPF, and the impact of nutrient and water neutrality requirements throughout the country.
Later living and planning
Looking to the longer term, the Government’s Levelling-Up and Regeneration Act 2023 is now on the statute books and will start to be brought into effect over the coming year. The Act presents both opportunities and challenges for IRCs and the specialist retirement housing sector more widely.
The Older People’s Taskforce
The government has listened to complaints and appointed a new Older People’s Housing Taskforce in May 2023. Its purpose is to investigate the existing housing market for older people, and seek ways to unblock any challenges. The scope of its work focusses on public and private specialist and supported older people’s housing, excluding care homes. Particular attention must be paid to the private market for those on middle incomes. The taskforce may make recommendations covering:
- The appropriate level of older people’s housing
- The enablers and barriers to growth of supply
- Options to increase the range and choice of specialised housing available to older people.
The taskforce is chaired by Professor Julienne Meyer and will run for up to 12 months. When its term is up, it will produce a report to the Department for Levelling Up, Housing and Communities and the Department of Health and Social Care.
The Taskforce already made early recommendations that:
1.
The government implements measures to protect consumers from hidden event fees as soon as possible. This is based on recommendations developed by the Law Commission in 2017 and accepted by the government in 2019.
2.
The government ensures that older people’s housing is given due consideration and prominence in the forthcoming revisions of the National Planning Policy Framework.
There are further recommendations to be made before May 2024 which we await with interest.
Immigration and the care sector
There are a wide variety of employment law changes coming in 2024 but perhaps the one to receive the most criticism so far is the proposed salary increases for Partner visas.
In early December 2023, the government announced several changes to the UK immigration system for Spring 2024. One of the most controversial was the intention to increase the minimum salary requirement for partner visas, under Appendix FM of the Immigration Rules, by over 100%. The current requirement of £18,600 per annum was planned to increase to £38,700 per annum.
Contacts
Stelios Coutsavlis
Partner, Real Estate +44 (0)7825 204 397
stelios.coutsavlis@irwinmitchell.com
Nicola Gooch
Partner, Planning & Environment +44 (0)774 777 3258
nicola.gooch@irwinmitchell.com