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07/12/2020

Retirement communities: Is it time for a new use classification?

Words: Laura Edgar
Retirement communities / iStock

Retirement communities seem to sit uncomfortably between two use classifications, making it hard to obtain viable planning permissions. Should the planning system have a special use classification just for these? The Planner’s news editor Laura Edgar asked three experts.

In the December issue of The Planner, we asked: Is it time for a new use classification for retirement communities?

Following a report earlier this year by ARCO (the Association of Retirement Community Operators) and CCN (the County Councils Network) Our news editor Laura Edgar considered the arguments for and against, with comment from people working in the industry itself, planning and planning law. 

We were only able to include a fraction of the responses they gave to our questions. Because this is such a complex issue, we thought it would be good to give their full responses – so here they are!

We asked three experts for their answers to three questions on the potential need for a new use class for retirement communities. Here’s what they said (click on question to go to responses):

  1. What constitutes a retirement community and what difficulties are there in delivering them when they don't fall neatly into an established use class? 
  2. Would, as ARCO and the CCN suggest, creating a new C2R use class help? 
  3. Is the Planning for the Future white paper, which doesn’t mention retirement or the elderly, a missed opportunity to amend policy to deliver sufficient homes for older people?

1. What constitutes a retirement community and what difficulties are there in delivering them when they don't fall neatly into an established use class?

Nicola Gooch is a partner at Irwin Mitchell LLP

A retirement community is probably best described using the ARCO definition: “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, communal facilities, and optional care and support as needed.”

They are designed to allow people to maintain an independent lifestyle and their own home, whilst knowing that 24-hour staff, care and support are available if and when needed. This both allows people to age in place and also provides a real community for the residents of the scheme.

“The use class classification, and the assumptions that go along with it, can have a real impact on a scheme’s viability”

How much of a problem the lack of a distinct use class for this type of housing is really depends on where you are proposing to develop the scheme. Some local authorities really understand the sector, the distinctions between the various types of provision within it, and the benefits that it brings. In these authorities, the lack of a specific use class is not much of an issue. 

In local authority areas where there is not in-depth knowledge of the sector and the differences between various types of provision within it, then there can be real issues. The reason for this is that use classes have become a kind of ‘shorthand’ for the types of benefits that certain developments should be expected to provide, and moving some local authorities away from the expectations that can be set by an assumed or wrongly classified use class can be difficult. 

Similarly, the very fact that you get such different approaches to the sector across the country is in and of itself problematic.

The use class classification, and the assumptions that go along with it, can have a real impact on a scheme’s viability. There is a general (not universal) expectation that C2 developments do not provide affordable housing either on site or through a contribution, whereas C3 developments do. Given that retirement communities have much higher operating costs than typical residential schemes, and contain a much higher proportion of non-saleable or communal floor space, unexpected contributions such as affordable housing payments can make a big difference to the viability of the scheme.

 

Craig Pettit is a planning associate at Barton Willmore

The need to deliver retirement communities is overlooked in a number of ways, due in no small part to how they straddle two uses classes. The salient points can be summarised as follows:

Housing need assessments/OAN do not assess the need for this type of accommodation specifically; it becomes subsumed in the housing figures, therefore often no specific provision is made for it. 

Where councils might assess the need for C2 uses, this often gets conflated with/categorised as care home provision, for which there is often not a need and therefore officers see no need to plan for this form of development. 

Allied to the above, there is a lack of understanding of what retirement communities are and there is a failure to recognise and plan to meet the arising need. As such, providers often find themselves competing for residential sites which attract higher land values, thus immediately raising issues of affordability and viability. 

The same level of importance is simply not attached to the delivery of retirement communities where they are considered as C2, despite their many benefits (freeing up family homes, social and economic benefits etc). One very good example of this was recent S78 Appeal in Mid Sussex (Hazelden), where the council attempted to argue  that there is no need to demonstrate a five-year supply of older people’s housing, so any under-provision (which they did acknowledge) was really irrelevant in policy terms.

“The fundamental issue is that adopted policies do not have enough knowledge of this sector and the provisions it requires”

Regarding the distinction between retirement housing and retirement communities, there is currently an acute lack of direction within local and national policy. 

The fundamental issue is that adopted policies do not have enough knowledge of this sector and the provisions it requires. Negotiations are therefore retrofitted around policies and use classes, that are often not appropriate for a retirement community development.

Not only does this result in a precedent being set locally each time these discussions are held but, more importantly, results in a lack of consistency nationally, making it increasingly difficult for both applicant and decision maker.  

The British Property Federation (BPF) report Housing and Care for Older People: Defining the Sector notes that currently there are 11 million people aged over 65 in the UK and by 2029 this is set to increase by 2.1 million. 

The report notes that there is a lack of choice between retirement housing and care homes, resulting in a requirement for a fivefold increase in the number of housing-with-care developments (retirement communities), in order to meet demand. The report also notes that the UK lags significantly behind other countries such as the USA, Australia and New Zealand in this regard and our planning system is not making it easy for these retirement communities to be delivered. It concludes by asking the UK government to establish a ‘Housing for Older People Taskforce’.

In a general sense the requirement to deliver affordable housing does impact viability. The reasons why relate mainly to what is offered to their residents. For example, retirement communities have additional services and facilities, higher build costs overall due to the homes needing to be adaptable and high quality landscaped grounds. There is often a need for providers to compete with mainstream house builders/developers who are able to offer higher payments for land.

Not enough evidence has yet been gathered to determine where the affordable need in this sector sits. For example, councils typically want a high proportion of affordable rented retirement units, but sector research shows that due to the high levels of home ownership within this age bracket, affordable rental units are often not the most desired.   

Notwithstanding this, extra-care provision is arguably often better provided for in the affordable market rather than the private, where there is normally the greatest demand. However, it must be noted that by providing affordable units in a retirement community context, providers end up in a position where some of the residents pay full price and others do not, yet crucially all have access to the same services and facilities – there is then the added question of whether service charges are also made affordable.  

Providers have consistently highlighted this as being the sticking point in seeking to integrate ‘affordable’ with regard to retirement communities.

 

Guy Flintoft is planning director at Retirement Villages Group

There is an increasing consensus that housing with care falls within use class C2, although Retirement Villages Group’s (RVG) recent experience is that many local planning authorities still struggle to grapple with the issue. But whether C2 or not, there are a number of difficulties applying affordable housing policies to housing with care as it if was general market housing.

Practically, there is no source of public subsidy to pay the service charges which are a feature of housing with care. The underlying costs make it impossible to acquire land in competition with other uses (mainly general market housing development) whilst also subsidising the provision of affordable housing. 

Housing with care is more expensive to build and sell than general market housing, includes extensive non-saleable communal areas, takes longer to sell and carries significant operational costs. These issues are not properly reflected in most local plan viability work, so that adopted policies are often unworkable in practice.

“The appeals process is a hugely costly and inefficient way for society to get the necessary housing built”

Another key difficulty is that the benefits of housing with care, as well as the societal need, are often overlooked by local authorities. Not enough local plans take account of housing with care with the result that local planners struggle to properly assess applications and weigh their benefits against other issues. 

RVG has had to resort to planning by appeal a number of times over recent years as a result. It has won in three out of four cases and has seen a similar trend amongst established operators. The appeals process is a hugely costly and inefficient way for society to get the necessary housing built. 

The most recent example was typical in that the local planning authority had refused the application on the basis there was no need for housing with care and therefore given the issue no weight – the inspector disagreed and gave the need for and benefits of housing with care substantial weight in allowing the appeal. 

A lack of consensus on how to assess need and miss-application of toolkits available to local authorities is a major issue. 

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 If classed as C2, does a requirement for affordable housing or a contribution affect the viability of such a scheme?

Care homes are classed as C2 (residential institutions); and retirement housing as C3 (dwellinghouses). C3 developments typically require an affordable housing contribution of some kind.

Retirement communities offer elements of both care homes and retirement housing – independent living with support. But they tend to be classed as C3 and the requirement to provide affordable housing can make them unviable.

“The use class classification, and the assumptions that go along with it, can have a real impact on a scheme’s viability,” explains Nicola Gooch. “There is a general (not universal) expectation that C2 developments do not provide affordable housing either on site or through a contribution, whereas C3 developments do. Given that retirement communities have much higher operating costs than typical residential schemes, and contain a much higher proportion of non-saleable or communal floor space, unexpected contributions such as affordable housing payments can make a big difference to the viability of the scheme.”


2. Would, as ARCO and the CCN suggest, creating a new C2R use class help?

Nicola Gooch: Provided that it was sufficiently clear in its scope, then a new or specific use class for retirement communities could be helpful. It may help embed a better understanding of the sector across England and help address the ‘postcode lottery’ situation that many developers in the sector face when trying to bring forward new retirement communities. 

"The concept of use classes is no longer necessarily determinative in deciding which policies apply"

However, following the High Court decision in Rectory Homes, it is likely to have less of an impact than it may have done otherwise, as the concept of use classes is no longer necessarily determinative in deciding which policies apply to a retirement community.

 

Craig Pettit: With regard to planning and delivery, a bespoke use class would help; however this needs to be underpinned by evidence to ensure that once created it remains robust, useful and effective.

The lack of evidence, or rather approach towards it, is something that first needs to be discussed and agreed between stakeholders and local and national government, before the effectiveness of a bespoke use class can be assessed.  

"This needs to be underpinned by evidence to ensure that once created it remains robust, useful and effective"

This aside, greater clarity in the use class will help with:

  • the assessment of informed ‘need’
  • providing clarity on where affordable policies might or might not be applied
  • helping to distinguish from normal C3 housing, which often does not have the same sustainable credentials and which therefore makes retirement communities more acceptable in locations where C3 would not be supported.  

However, one downside of the introduction of C2R would be the (incorrect) assumption that all, or the majority, of those aged 65+ years would fall into the ‘retirement needs’ bracket when it comes to assessing housing needs. This is plainly not the case. 

 

Guy Flintoft: It is unusual for local planning authorities to plan specifically for housing with care and rare for them to allocate specific sites. This is starting to change with the amended NPPF and expanded guidance in the PPG but it is early days. 

Local planning authorities need to properly assess the needs and set targets for their plan period. Policies should then set a framework for how the necessary development will be provided, ideally by allocating specific sites. This is particularly important for housing with care as the site requirements are far more specific than is the case for retirement flats without care and for care homes, both of which can more readily be provided on smaller windfall sites.

"Clarity over use class for housing with care would help, but would need to be backed up by guidance and best practice that is realistic"

Clarity over use class for housing with care would help, but would need to be backed up by guidance and best practice that is realistic about deliverability. There is no point having a C2R use class or clarity that housing with care falls within the existing C2 class if local authorities then adopt policies based on flawed or incomplete evidence on need, viability, etc.

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3. Is the Planning for the Future white paper, which doesn’t mention retirement or the elderly, a missed opportunity to amend policy to deliver sufficient homes for older people?

Nicola Gooch: The white paper is an extremely high level document, which fails to address a wide range of issues, including any mention of logistics, employment land or green energy, so retirement communities are by no means alone in being overlooked.

My firm has submitted a response to the white paper, in which we point out several of these omissions and suggest that a further consultations are required to enable everyone to understand how the white paper proposals are to be implemented. 

"There should be a much stronger requirement on local planning authorities to actually define the level of need for specialist housing for the elderly"

Greater detail is needed on how growth, renewal and protect areas are to be designated and what they intended to contain. There should also be a much stronger requirement on local planning authorities to actually define the level of need for specialist housing for the elderly in their area (as part of their overall housing need) and to allocate sufficient sites to meet that need. 

 

Craig Pettit: The silence in the government’s recently published white paper towards the needs for the retirement age population, both now and into the future, is of notable concern and highlights the lack of attention this area of need is being given. The white paper, in discussing the desperate requirement for the delivery of housing, which is not disputed, fails to account for both ends of the spectrum.  

It is also at odds with the Planning Practice Guidance (PPG) which was recently specifically amended to provide greater guidance on the delivery of housing for older people, including “accommodation for the elderly”. 

The section specifically opens with “the need to provide housing for older people is critical”. Whilst this statement itself in the PPG is not new, it now leads a whole new section highlighting its importance and the benefits it can secure both socially and economically. If the PPG can be up to date and reflecting this recognised need, it is all the more disappointing that the housing white paper fails to mention this need at all – or a proposed solution in seeking to meet it moving forward.

"We must question even more why such a crucial element of forward planning has been missed by the document"

It is well documented that circa 75 per cent of people aged 65 and over own their homes outright in England and looking at the next decade, and currently people over 50 are purported to hold circa 75 per cent of all housing wealth (Savills). These figures not only reveal a huge current and future demand, with those within this group seeking ‘housing-with-care’ options, but also the vast levels of housing stock that will be released as a result.

With the added bonus this provides in relation to the delivery of housing, we must question even more why such a crucial element of forward planning has been missed by the document that sets the foundations for a “radical reform unlike anything we have seen since the Second World War”. 

In line with the taskforce that ARCO are requesting, the white paper should note the critical need of housing provision for the retirement age population and specifically seek to address and plan for it. The fact that the majority of this sector own their own homes can be seen as positive, however it does not mean that these homes will meet their needs into the future.      

 

Guy Flintoft: Absolutely it is a missed opportunity. Retirement Villages Group responded to the consultation and cautiously supports much of the thinking, although there is a lot to do to make it work. Affordable housing gets a specific mention, as do first homes and self and custom build, and the need to boost housebuilding generally is a major objective.

There is no mention of any form of retirement or care housing, or of the massive growth in the number of older people. This is clearly a missed opportunity, given that in many areas almost all household growth is amongst older people. This is often overlooked because they are already housed, but that ignores the fact that they are often under-occupying large homes suitable for families and increasingly unsuited to their own needs.

"That ignores the fact that they are often under-occupying large homes suitable for families and increasingly unsuited to their own needs"

Facilitating an increase in rightsizing by older people could create significant movement in the housing market, creating opportunities for many thousands of households and resulting in a better use of housing stock.

Looking at it positively, the white paper is about the system rather than policy, but having assessed the issue of housing for an ageing population as critical, ignoring it in the biggest shake-up of planning for decades seems perverse.

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