Seniors Housing & Healthcare Trends

LOS ANGELES: Most property timelines follow a similar pattern — you start out renting, graduate to homeownership, then pay off your mortgage and downsize in retirement to release capital and make life more manageable.

Those who downsize usually buy their retirement property. Few consider renting to be an option because they worry it will run down their estate and leave them with nothing to pass on to the next generation.

But renting in retirement can be the perfect solution for some downsizers. It gives the flexibility to relocate easily, avoids the expense of buying and selling, bypasses the stress of property maintenance and can release money for other uses.

For those who want to live in a retirement development, renting can be a more sensible option than buying because those kind of properties can come with pitfalls — they can be hard to sell because of high service charges and exit fees. Obviously renting is not an ideal option if you can’t cover the rent from retirement income and a cushion of cash, to ensure that you don’t end up homeless, but for some, it can be like a holiday from homeownership.

We talk to some homeowners who decided to rent in retirement, and haven’t looked back.

The Johnsons — Norman, 83, and Rita, 82 (not their real names) — sold their family home in rural Somerset 18 months ago and moved into a two-bedroom bungalow in Wells rented from a private landlord who is planning to use it as his own retirement home one day.

They wanted to live somewhere that was easier to manage and reduce how much driving they needed to do. But it also made financial sense. “We decided to rent rather than buy so we could invest the proceeds of the sale to provide additional income, potentially to cover any care costs in the future,” Rita said.

“We wanted funds to be readily available and not to be forced to make a disadvantageous rushed sale, given that we’re in our eighties and conscious of advancing years. We also wanted to be relieved of the responsibility and expense of maintenance.”

They cover the rent with income from their pensions and investments and are happy with their new life. “Whenever we have a small maintenance problem, the landlord has dealt with it immediately. We are very central and don’t need to use the car very often — we walk a lot, which is good for our health,” Rita said.

One problem with renting is the insecurity of tenancies — assured shorthold tenancies are common and typically run for a set period, such as six months or a year. After that the landlord has the right to repossession, giving notice, typically of two months. Assured tenancies, where the landlord does not have the right to take the property back after the initial term, are less common.

The Johnsons’ assured shorthold tenancy was initially for a year and has now moved on to an open-ended rolling contract. “We feel pretty secure as the landlord wishes to live here himself on retirement, which would be in about ten years. Of course this could change and we could be asked to leave,” Rita said.

Many downsizers choose a retirement development that offers independent living in private flats as well as communal facilities and activities. Many now are built with units specifically for rent or part-ownership.

Nick Samuels from McCarthy Stone, which runs 543 retirement developments across the UK, said: “Our research suggests that 50 per cent of our potential customers would be happy to consider renting. Many are owner-occupiers at present, which suggests strong demand from homeowners.”

McCarthy Stone has homes for more than 21,500 people, including about 1,000 rental flats. The company operates as a managing agent and landlord, so tenants are unlikely to be asked to leave unexpectedly because the landlord’s plans have changed.

Most McCarthy Stone tenants in England have an assured tenancy agreement with a minimum 12-month term and a two-month notice period. In Wales it uses periodic contracts, which have no minimum term.

The company also offers care and support services to help tenants to live independently for as long as possible. This suits Jean Baxter, 95, who sold her detached four-bedroom house in Yorkshire to move to a two-bedroom flat in a McCarthy Stone home in Tunbridge Wells, Kent, to be nearer to her daughters and grandchildren. The development offers bespoke care services that range from help in getting appointments or shopping, to extra cleaning and meal preparation or assistance with bathing, dressing and shaving.

Baxter said: “I chose renting because it gave me the flexibility to move straight away and avoided the hassle of having to sell a property later down the line,” she said. She has made friends, gets out and about, and regularly sees her family. “It really has given me a new lease of life.”

Lauren Macpherson from the retirement lettings agency Girlings said that retirement properties can come with service charges of £800 or £900 a month — but these are the landlord’s responsibility if the property is rented, although they can of course pass on the costs through the rent.

“Tenants in retirement developments pay a single monthly payment, which includes the service charge and maintenance,” Samuels said. Tenants must also cover their council tax and utility bills.

McCarthy Stone suggested that typical rent for a one-bedroom unit in a retirement development would be between £1,370 and £2,350 a month. Two-bedroom rents are from £2,040 to £2,870 and extra care support costs more.

Retirement Villages Group, which runs 16 sites across the UK containing more than 1,500 self-contained homes, has rental properties for between £2,250 and £4,200 a month.

The more expensive Audley Villages, which has retirement developments across the country, has two-bedroom flats at its village in Cooper’s Hill, Surrey, that cost £5,000 to £6,000 a month to rent.

The Hawthorns, a retirement living company with four locations in England, has a different model. All its residents are on the same rental arrangement, with no owner-occupiers, and the monthly charge covers rent, utilities, council tax, internet and cleaning, plus all meals and some trips and activities.

Paul Tripney from the Hawthorns retirement village in Braintree, Essex, said the flexibility of the rental agreement means that residents have security but don’t have to commit to a minimum six-month period — they can give 30 days’ notice at any time. Its most recent data, which is from before the pandemic, showed that residents stayed for an average of about three and a half years. A studio flat starts at about £2,000 a month; one-bedroom units start at £2,950 and two-bedroom flats at £3,450.

Not all rental properties in retirement developments are operated by the developer. Macpherson said that 90 per cent of the properties on Girlings’s books belonged to “accidental landlords” — family members who inherited property but didn’t want to sell in the slow market.

Those who buy retirement properties can find them hard to sell on. Prices remain fairly static compared with the wider market, potentially because of the limited pool of potential buyers. You usually have to be 55 or over to buy — the average age of residents is 85 to 87, Tripney said.

Steep service charges and high exit fees can also be a deterrent for buyers — some developers take 20 per cent or more of the sale price. Audley, for example, levies a “deferred management charge” of up to “28 per cent of the final sales price or open market value, whichever is greater”.

All this means that renting out a retirement property can be a useful option for accidental owners — and so good news for tenants. Macpherson said: “Our landlords are responsible for service charges and ground rent as well as maintenance expenses, so they are generally aiming to break even, rather than make a profit. Tenancies are for a minimum 24-month period, and we encourage landlords to view the arrangement as a long-term one rather than a buffer period before they sell.”