Editor's Comment: Why downsizing is sensible for retirees and the country

big-house-with-arrow-pointing-to-small-house

The idea of moving out of the family home and into a smaller house or flat is not an easy one to embrace for many older people.

Of course they'll be glad to be shot of the worries and expense of maintenance, the draughts, the overgrown garden; but in many cases this home is the cradle of many decades of memories, familiarity and comfort. There's space for the family to visit, and old friends down the road.

My mum is a classic case. She took five years to come round to the idea of downsizing from her Cornish home of almost 30 years to a two-bedroom flat in a so-called 'retirement village' in Hertfordshire; she has never looked back since moving, but it was a huge, traumatic step to take.

Sizing up the downsizing dilemma

VALID ARGUMENTS

Now the government, as it has recently made clear in its white paper on the problems of the UK's housing market, is targeting greater willingness to downsize on the part of retirees as a key aspect of the longer-term solution to the shortage of homes.

At a macro level it certainly makes sense. Larger homes are desperately needed by younger families.

And they tend to be underutilised by their present occupants: new research by the think-tank International Longevity Centre UK (ILC-UK) has found that almost nine in 10 of the 65-79 age group live in homes they don't fully use, while half have two or more bedrooms empty.

In micro-economic terms, too, there's a valid argument. Many older people have far more wealth tied up in their properties than readily available in cash or investments; downsizing will give them easy access to the funds they need for a more comfortable retirement, and perhaps down the line for long-term care.

An action plan to fund long-term care

However, while the government's white paper acknowledged the 'many barriers to people moving out of family homes' and has committed to 'finding sustainable solutions to any problems that come to light', it didn't provide much in the way of flesh on the bones of the downsizing proposition.

It's a complex issue. With a potential retirement housing gap of 160,000 homes by 2030, according to the ILC-UK's findings, one strand is undoubtedly going to involve encouraging housebuilders to build more of the kinds of homes older people want to live in.

Another aspect should arguably involve making the process of downsizing less traumatic. As anyone who has ever been through the mill of property purchase will testify, moving home is a nightmarishly stressful experience, up there with divorce and bereavement.

Many elderly people are understandably reluctant to put themselves through that again without a very good reason.

Commentators have also suggested that older people might be more incentivised to sell up if they didn't have to fork out on stamp duty for the next purchase.

RENTING IN RETIREMENT

Of course, the big assumption underlying most commentary is that downsizing means buying another property. Why is that?

Home ownership is deeply engrained in the British psyche, and for many people the idea of going back to paying rent is absolute anathema after decades spent paying off the mortgage and is seen as 'pouring money down the drain'.

But the reality is that renting in retirement doesn't have to be insecure. It's possible for older homeowners to sell up and rent on an assured tenancy.

This gives them the right to stay in the property for as long as they wish (in contrast to an assured shorthand tenancy, which works on the basis of a fixed term, often as little as six months).

Girlings Retirement Rentals is one specialist in this area, with properties all over the country available on assured tenancies.

Moreover, renting brings certain big advantages under the umbrella of flexibility.

How much easier it would be, for example, to up sticks and move home if you wanted to relocate nearer to the grandchildren, or decided you fancied a different - maybe more urban - type of retirement in a different corner of the country, or wanted to see what it felt like to live beside the sea.

For many older people, particularly those without much in the way of additional investments, there is also the enormous benefit of access to a meaty lump sum.

If you rent, you don't have to plough it back into another illiquid property; instead you could reinvest it to provide an income that would at least partially cover your rent, and might supplement your pension too.

And if in due course you did need residential care, the money would be readily available to pay for it.

I'm well aware that the idea of renting in retirement will seem a pretty retrograde step to many Money Observer readers on first consideration, but maybe it should be more widely considered as one of the options on the downsizing menu. It could turn out to be a surprisingly appetising prospect.


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