Rightsizing Not Downsizing for Pensioners

New Housing Minister Matthew Pennycock has committed to tackles the UK’s diverse housing market and in particular will be focusing on older people’s needs following the publication of the 'Older People’s Housing Report’.

Successive governments have long recognised that there is a shortage of suitable accommodation options for older people.  To the point where councils were allowed to introduce a bedroom tax i.e., social housing tenants are assessed to see if they have too many bedrooms and then have a choice to ‘downsize’ or have your housing benefit reduced.

Not much attention has been paid to the private sector until now.  The report recognises that many older people who own property (or rent from private landlords) may be living in properties that are larger than required.  Many are reluctant to sell up as there are little or no options to remain in the area and if so, it will usually be very expensive private/sheltered accommodation that costs as much, if not more, than your current home with additional huge annual service/maintenance fees to pay.

Comment

It makes sense to develop a cohesive programme to build suitably sized ‘rightsize’ private accommodation with security/wardens etr that meets the needs of older people will release much required 2/3/4 bedroomed housing stock for younger people and families.

We suggest there must be additional incentives too.  For example, if you are an older couple with middle income and average sized property private homeowners, you have residential nil rate band inheritance tax allowances.  The average UK property valuation is around £294,000 (Halifax October 2024).  This means that a couple each have £325,000 IHT nil rate bands (NRB) and £175,000 property residential nil rate band (RNRB), total £0.5m each.  That’s £1m in total on 2^nd death.

By downsizing to say a £125,000 ‘retirement’ property, you lose £50,000 RNRB (if single) and £225,000 RNRB if a couple meaning more inheritance taxes on other wealth.

Incentivise to Rightsize

We suggest, the only way to encourage older people to ‘rightsize’ would be to keep full IHT allowances if you ‘rightsize’ and even offer concessions that any ‘retirement’ property is not included in any care fees means test.