Development taxes choking Britain’s housing supply – for old and young

  • New research from Demos think tank responding to the 2017 Housing White Paper finds that development taxes (Section 106 and CIL) are scuppering retirement housing development, which has enormous social value and helps free up housing for young buyers and growing families.
  • Demos finds evidence of a looming crisis in the supply of housing for older people, as current policy favours developers building starter properties, rather than also supporting older people to downsize – which would spark a positive “chain reaction” in the housing market.
  • Demos’ focus groups with older people finds widespread support for policies to help them downsize, including stamp duty exemption; practical help with moving; and opportunities to “try before you buy”.
  • The report uses new economic modelling to show the impact of planning charges on the viability of retirement developments – and concludes only an exemption from these charges will tackle chronic under-supply in the face of significant and rapidly growing demand.

New research from Demos into the UK’s housing market finds that the supply of housing for older is being choked by planning charges and affordable housing contributions imposed on retirement property developers.

In preparing Unlocking the Market, Demos carried out new economic modelling, interviews with sector experts and housebuilders, and focus groups with the over 65s who are looking ahead to retirement, in London, Birmingham and Leeds, as well as with people already living in retirement housing.

The research finds that while up to a third of older people are interested in moving into retirement developments – up to 3 million people – many are held back by a mixture of financial, practical and emotional barriers. At the same time, only 7,200 retirement homes are being built each year, less than a quarter of the 30,000 retirement properties we need annually just to meet immediate demand.

Demos’ discussions with current developers revealed systemic barriers to supply, including: a lack of recognition in Local Plans, the existing planning tax regime, and huge delays in negotiating affordable housing contributions. One developer reported that two thirds of the time spent on planning is taken up with affordable housing negotiations, and most negotiations take longer than the statutory time limit of 13 weeks.

But another major problem is a shortage of new developers coming in to the market: a lack of incentives in the retirement market means few mainstream volume developers or SMEs are interested in building retirement housing, compared to a range of policies like Help to Buy which boost the mainstream and first time buyer markets.

The report links these problems to the overall shortage in the wider housing market – pointing out that the construction of just one 41-unit retirement development sparked 92 separate moves within the local housing market as older people moved out of their family homes. This “domino effect” included a number of first-time buyers getting onto the property ladder.

Unlocking the Market focuses on improving the provision of four types of retirement development:  “downsizer” housing, retirement living, extra care housing and retirement villages. Using a hypothetical 0.4 hectare piece of land in the south east of England, Demos found the first three of these would offer developers a staggering £600,000 smaller return than mainstream house builders or retailers for the same plot of land. Care villages – which need larger plots, fare worse.

While retirement developments have higher build costs – often needing to construct restaurants, lounges, treatment rooms, accommodation for on-site staff and even facilities like well-being suites and hairdressing salons  – they are usually treated no differently than general needs housing when it comes to local planning taxes. Moreover, one of the main taxes is levied per square metre, even on “unsellable” communal facilities, meaning retirement developers usually pay more in tax than their mainstream counterparts.

Demos argues that the social value of these facilities – which save health and social care services millions of pounds  every year by improving the health and wellbeing of the people living there – and their potential to free up housing for the benefit of younger buyers and growing families, should be acknowledged in the planning system.

Based on the findings of the report, Demos recommends the Government explores:

  • An exemption from affordable housing contributions and planning charges on retirement housing developments to boost supply to the scale needed to meet demand.
  • A stamp duty exemption for older people moving to retirement housing targeted (at first) towards those with lower value homes, to establish its efficacy. A subsequent extension would see some of the increase revenue be used for a progressive reduction of stamp duty for other age groups.
  • The offer of a “Help to Buy”-style equity loan for older people who may need to bridge the gap between the value of their home and the purchase price of a new retirement property.

And that retirement developers:

  • Offer practical support packages for prospective buyers, as some already do. This package would include help to pack, move, connect utilities etc. and be overseen by a “key person” to provide reassurance and consistency throughout the move and settling in period.
  • Maintain a furnished property in their developments for older people to have short stays in, to “try before they buy”, as well as engage older people living nearby and invite them to participate in the range of social activities that take place in developments, to boost visibility and word of mouth.

Commenting on the report’s findings, Demos’ Director, Claudia Wood said:

“The shortage of housing for older people is no less serious than the shortage of housing for first time buyers. And yet so little is being done to ensure older people stuck in unsuitable properties, and keen to downsize, have this option.

Up to three million over-65s say they are interested in buying a retirement property, and expect to free up around £80,000 in equity if they did so. And yet only 186,000 retirement properties are available to buy in the whole of England and Wales. But suffocated by local planning charges, developers just can’t build fast enough and operate waiting lists up and down the country.

By tackling local charges, and encouraging developers to build enough to meet demand among older people eager to move, the Government will also be helping first-time buyers and families by freeing up property all the way down the housing chain. It’s a win-win situation.”

John Slaughter, Director of External Affairs at the Home Builders Federation, said:

“The shortage of specialist retirement housing is the often overlooked part of our housing crisis. Building more retirement homes will add to the overall increases in housing supply we have seen and help ease pressures across the housing market.

The Government’s Housing White Paper was very welcome in recognising the benefits of increasing the supply of housing for older people. We now need to see the proposals implemented so builders can get on and build more homes.

“Demos’ study sets out the issues preventing builders delivering the volume of housing for older people that is required. To enable more retirement homes to be built calls for bold and decisive measures. Policies need to support existing providers and enable more builders to focus on providing specialist accommodation. We hope the Government will act on the report’s recommendations and implement the changes the industry needs to enable it to deliver.”


Research for this project took place between July and September 2017. The research was made up of:

  • A rapid evidence assessment
  • Economic modelling
  • Interviews with sector experts and housebuilders
  • We conducted three deliberative focus groups with people aged over 65 who were not living in retirement housing, which took place in London, Birmingham and Leeds.
  • We conducted a workshop with homeowners living in a retirement housing development in south east England Around 25-30 people attended the workshop.