ARCO's Director of Policy and Communications, James Lloyd, has written for Inside Housing Living on why ministers should encourage deferred management fees to enable the magic sauce of housing-with-care.
The full article can be read on the website of Inside Housing Living here. A short version of the article is reproduced below.
***********************************
Unlocking £2.5 Trillion in UK Housing Wealth: Why Later Living, Not Taxation, Is the Real Solution
The UK’s Untapped Housing Wealth
Older people in the United Kingdom hold more than £2.5 trillion in housing wealth, yet many are asset-rich but income-poor.
This imbalance presents a major policy challenge — and opportunity. With so much wealth tied up in property, policymakers are increasingly asking how it can be mobilised to:
- Support economic growth
- Fund public services
- Improve financial resilience in later life
Why Tax-Based Solutions Fall Short
One commonly proposed solution is taxation, particularly on high-value homes. However, debates around a “mansion tax” highlight the limits of this approach:
- Only a small proportion of households would be affected
- Housing wealth remains politically sensitive and difficult to tax
- It does little to address the core issue of illiquid assets
Recent fiscal debates have reinforced a clear conclusion: housing wealth is not easily unlocked through taxation alone.
A More Effective Approach: Enabling ‘Use’, Not Taxation
A more practical and scalable solution is to help older people actively use their housing wealth, rather than attempt to extract it through taxes.
This means making it easier to:
- Downsize or “rightsize” in later life
- Access suitable housing options
- Convert illiquid housing equity into usable income
Key barriers still need to be addressed, including:
- Stamp duty costs
- Limited supply of attractive later living housing
- Low awareness of financial options such as equity release
The Role of Integrated Retirement Communities
Specialist housing models — particularly Integrated Retirement Communities (IRCs) — are central to this solution.
IRCs combine:
- Private homes
- On-site care and support
- Amenities such as restaurants, gyms, and social spaces
Evidence consistently shows that moving into this type of housing can:
- Improve health and wellbeing
- Delay the onset of age-related conditions
- Reduce pressure on health and social care systems
The Cost Challenge — and the “Deferred” Solution
The key challenge is that high-quality housing-with-care comes with additional costs:
- 24/7 staffing
- Communal facilities
- Maintenance of shared spaces
This is where Deferred Management Fees (DMFs) play a critical role.
What Are Deferred Management Fees?
Deferred Management Fees — sometimes called event fees — allow residents to:
- Pay lower upfront costs
- Defer part of the cost until the property is resold
- Access higher-quality services during their lifetime
This “live now, pay later” model has become a cornerstone of the sector globally.
Why Deferred Management Fees Are Growing
The use of DMFs has expanded rapidly in the UK and internationally. Their growth is driven by four key factors:
1. Improved Affordability
DMFs enable more older people to access later living communities by reducing upfront costs.
Without this model, many residents simply would not be able to benefit from:
- Social connection
- Preventative health benefits
- Safer, more supportive environments
2. Reduced Financial Risk for Residents
Operators often take on long-term costs such as:
- Major repairs
- Capital expenditure
This protects residents from unexpected large bills and financial uncertainty.
3. Strong Consumer Preference
When given a choice, residents typically prefer:
- Higher deferred fees
- Lower monthly costs
This reflects a clear priority: maximising disposable income in later life.
The model is also supported by consumer protections, including the ARCO Consumer Code, which ensures transparency and understanding of all fees.
4. Positive Impact on Resale Values
Deferred fees can:
- Increase affordability for future buyers
- Expand the pool of potential purchasers
- Incentivise operators to maintain high-quality schemes
This helps address one of the biggest concerns among prospective residents: resale value.
A Proven International Model
The DMF model is not new. It originated in Australia in the 1970s and is now standard across many global retirement living markets.
Its success has demonstrated that:
- Housing wealth can sustainably fund later living
- Resident-funded models can replace reliance on state subsidy
- High-quality communities can scale effectively
Policy Momentum in the UK
Policymakers in the United Kingdom increasingly recognise the role of deferred fees.
Recent legislation, including the Leasehold and Freehold Reform Act 2024, has:
- Provided formal recognition of event fees
- Increased clarity and legitimacy for the model
However, policy support remains limited relative to the scale of the opportunity.
The Economic Opportunity
If the UK scaled its housing-with-care sector to match countries like New Zealand, the impact could be significant:
- Billions in housing wealth unlocked
- Increased consumer spending
- Job creation across housing, care, and services
- Reduced pressure on public services
This is not just a housing issue — it is a national economic opportunity.
Conclusion: A Smarter Way to Unlock Housing Wealth
The debate around housing wealth should move beyond taxation.
Instead of focusing on politically challenging measures like mansion taxes, policymakers should:
- Expand later living housing supply
- Remove barriers to downsizing
- Support models like deferred management fees
The goal should be simple:
Enable older people to use their housing wealth to live better lives — while unlocking economic value for society as a whole.
