Recent events highlight the need for good residential care in the UK, and traditionally long-term investors, such as pension funds, life insurers and family offices make suitable sources of funds. As the UK seeks to embrace infrastructure spending to kick-start growth, the area is worth attention, the author of this item argues.

The UK, along with other countries, needs to revive economic growth rapidly. The reasons are obvious. According to the government’s independent economics forecaster, the Office for Budget Responsibility, UK GDP could slump by 13 per cent throughout 2020. Independently of the COVID-19 pandemic and associated lockdowns, the UK - and other nations - face a rising bill for long-term care as populations age. Long before anyone had heard of the virus, the ageing of developed countries’ populations and how to deal with this was a central concern (if not one that politicians were always keen to talk about, given the financial realities). 

But the great thing about capitalism is that where there is a need - for more care for the elderly - entrepreneurs can put capital to work, building and refurbishing places such as care homes. Institutional investors such as pension funds and life insurance groups are obvious sources of funding, given their time horizons and need for steady returns. The same applies to family offices, which often think in terms of generations going out for decades. 

To discuss property investment and social care is Dr Eamonn Butler, MA PhD Hon DLitt. He is director of the London-based Adam Smith Institute, the think tank, and the editors of this news service are pleased to share these views and invite debate. To jump into the conversation, email tom.burroughes@wealthbriefing.com or jackie.bennion@clearviewpublishing.com

 
For decades the backbone of long-term property investment for insurers and pension funds has been office and retail developments. But now the malls are shut and our office blocks are empty as we all work from home and order our clothes and gadgets online.

Landlords are definitely expecting a short-term hit as office firms without any work and retailers without any customers struggle to come up with their rent. But the movement away from large office and shop developments might of course become permanent. 

The trend to working from home has been speeded up by the simple necessity of living and working under lockdown. Recent breakthroughs in communications technology allows companies to run themselves from their workers’ homes, far better than they ever imagined. And again, the simple fact of not being able to go to a store has meant that middle-aged and older people are doing what the youngsters have always done; discovering that shopping online is not so difficult or worrisome at all - indeed, it allows you to compare a whole world of keenly priced, customer reviewed products for next-day delivery without having to trudge to the bus stop in the rain. 

Even cultural and voluntary groups are discovering that they can reach more supporters and a bigger audience online than they could ever attract to lecture in some local venue.

So, there is good reason to believe that our high streets and commercial centres will never be quite the same again. Of course, offices will start up again, because people miss the buzz and the gossip, and because some things are just easier to do round a table. But does everyone have to brave the morning commute and be there all at once? Maybe we are heading for a world in which people come into the centre only a few at any time, or that everyone comes in less frequently, for major events. And while we might all be looking forward to gassing with our friends over a Latte in the market square, and maybe browsing round a few shops whose wares we’d never think of looking for online, it is hard to imagine that our malls and high street will ever be quite the same.

But long-term investors need secure long-term investments. So, if it is not commercial and office property, where is that investment to go? Well, even if the traditional investment markets are fading, there is one that could expand fast. The fact is, we are all getting older. There are now 12 million people aged over 65, nearly a fifth of the population and 2 million more than ten years ago. The biggest growth is among the 1.6 million people aged over 85. Better technology helps us stay self-sufficient longer at home, but there comes a time when maybe a third of us need some sort of social care - which means we also need the buildings in which assisted living, extra care or residential care can be provided. 

In fact, the market is even bigger than this. Almost half of local authority care spending goes on people under the age of 65. People with severe physical disabilities, for example, including brain injuries, or people with other mental health conditions or with learning difficulties. And people in those groups are living longer too. 

It all means that there are around 400,000 people in something like 20,000 residential nursing and care homes, plus thousands of others being looked after in some other setting. That is a lot of real estate. 

And unfortunately, it is a lot of crumbling real estate. Around three quarters of residential homes housing local authority clients were built before 2001, when standards were lower. Some are not even built for purpose but are old houses and hotels that have been knocked together. They may have narrow corridors you can’t get a bed down, and steps you can’t get them up. And poky dayrooms and bedrooms with no ensuite bathroom. That’s a lot of property to upgrade - or better, replace. But the local authorities simply don’t have the money even to think about it.

But, as we say in our new report, Fixing Social Care, this looks like the basis for a deal. Long-term investors are seeking secure long-term investments, and local authorities need to place their clients in better, purpose-designed care homes. So, we suggest ways in which consortia can develop new residential, assisted living and extra care facilities - not in the ones and twos that happen now but in an economies-of-scale-grasping ten or fifteen at a time - and then lease them, and an entire service package, to local authorities over a period of perhaps 25 or 28 years. Then the local authorities get a secure home for their caseload without having to stump up billions to build new homes and replace old ones. And they will also be getting better equipped facilities in which a better standard of care can be provided. 

Indeed, they could commission homes designed to meet the specific needs of groups like the frail elderly or those with dementia, some of whom have very challenging behaviour that isn’t easy to deal with in an old converted hotel. They could even save money by committing unused council-owned land for the purpose.

Of course, there is much more to be done to "solve" the care crisis. Like using more artificial intelligence, communications, telemedicine and other new technologies. That would make it easier to deliver care in residential home settings, and to people’s own homes, when human resources are stretched. 

But a massive initiative to replace our outdated and substandard nursing and social care homes, financed by private investors, is a good start. And it would be a far better way of stimulating our economic recovery after COVID-19 than any number of Westminster prestige projects. It would solve a real and growing problem over a long term. It could even give us fit-for-purpose facilities that are designed to make it more difficult for infections to spread - encouraging more hard-pressed families to think about a care home rather than struggling to look after needy relatives at home, so releasing massive unmet demand on the self-pay side too.