And despite the odds you managed it, scrimping and scraping to build up a deposit, and making lifestyle sacrifices to afford the monthly mortgage payment. Decades later, the effort has been worth it. The mortgage was paid off some time ago and you own a property that not only provides a safe and comfortable lifestyle but is also a substantial financial asset.
You also have a good pension and some money put away in the form of savings and investments. Presuming continuing good health, the future is looking good. So why in heaven’s name would you want to go back to renting? The question has been given credence by a new survey from Knight Frank, which predicts private renting to seniors in the UK is likely to increase by 160 per cent over the next five years.
This trend is likely to be accelerated by health and safety concerns over Covid-19. Property aimed at “senior” renters or buyers is, however, an extremely varied market and no longer confined to what is traditionally referred to as “sheltered housing”.
Part of that market is increasingly made up of complexes aimed particularly at older singles or couples who are still physically active, do not have underlying health problems, and may even still be in full-time employment, but who, nevertheless, wish to live in an environment where lifestyle and services are more appropriate for their age group. And in such cases, renting as well as buying is often an option.
But, to get back to my earlier question, why return to renting, unless reduced financial circumstances make such a move absolutely necessary? In a word, “flexibility”, which, from a housing point of view, in some ways is as relevant to older people (though in different ways) as it is to young adults. For older people who live in houses that have become too big for them, downsizing remains the most popular choice.
This provides a more affordable, more manageable household, releases equity, and enables them to retain their status as “owner-occupiers”. Switching to renting, however, will release substantially more equity and, as a result, need not have any downsizing effect on home comforts.
The case for senior renting may become even more plausible as the government presents to the public its “bill” for dealing with coronavirus. Almost certainly we are in line for greater personal taxation that may even apply to “main or only” homes. Perhaps not directly with an additional tax on direct sales (what is Land and Buildings Transaction Tax or Stamp Duty if not a tax already?) but rather in a more subtle way, say involving inheritance tax (IHT).
Even as things stand, returning to renting in later life can have IHT advantages. As a main home is regarded as a taxable asset when the owner dies, increasing numbers of estates are becoming liable (at least partially) for IHT, currently standing at 40 per cent. However, if someone releases equity from a house sale, passes some of it over to adult children and then survives for the next seven years, inheritance tax will not be payable on whatever sums are given away.
Later-life renting, through choice rather than necessity, needs to be considered carefully before taking action, for example deciding if your non-property assets will see you comfortably through the remainder of life. Last week this column called for a “build to rent” market that encompasses a wider cross-section of the population. This should include older home-owners for some of whom a later-life switch to renting could be advantageous.
As for developers and their financial backers, schemes aimed at this market would likely enjoy a high-asset value, helped partially by a low (and perhaps non-existent) payment default environment because a), the tenants would tend to be relatively high net worth and b), belong to a generation that believes it actually has a duty to pay their bills – and on time.
David Alexander is MD of DJ Alexander
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