Unlocking opportunities within the UK’s Later Living market

Image: Rod Long for Unsplash

Demographic certainty, evolving consumer expectations and a growing ESG imperative are converging to position the Later Living market as a major opportunity within UK commercial real estate; according to a 2025 survey by Shawbrook Bank, 42% of developers identified the sector as the most profitable area for driving commercial property growth. Yet, despite these favourable fundamentals, the UK market remains underdeveloped compared to international peers, raising the question: what is holding the sector back?

To figure out why, we first need to understand how the market works.

A myriad of terms are used to describe the Later Living market: retirement living, senior living, sheltered housing, housing with care and extra care, often creating confusion about what these offerings represent. ARCO (The Associated Retirement Community Operators) is trying to change this, promoting the adoption of standard terms across the industry, alongside a clearer understanding of what provisions are available. ARCO splits provision into Retirement Housing and Integrated Retirement Communities. In this blog post, I relate to both of these under the term Later Living.

Integrated Retirement Communities (IRCs) typically offer a broader range of amenities and hospitality‑style services, alongside a greater emphasis on care‑enabled living. While Retirement Housing usually provides more limited shared amenities and fewer on‑site, care‑focused staff. In practice, however, provision sits along a sliding scale, with significant variation across the market.

Within Later Living communities, domiciliary care is offered separately to baseline accommodation and lifestyle services, enabling residents to access care as and when their needs change. Homes are also designed to be adaptable, enabling residents to ‘age in place’ as care requirements change. Most operators have partnerships with third-party domiciliary care providers in place to ensure care is easily accessible (while preserving resident choice), with some also operating in‑house care services to further streamline provision.

While adaptability and ease of access to care are central pillars of Later Living, a persistent misconception is that moving into a Later Living property represents a step towards a care home, when in reality, the evidence suggests the opposite. Purpose‑built Later Living environments support independence for longer and reduce the likelihood of a sudden or crisis‑led move from an unsuitable family home directly into residential care. UK studies by organisations including ExtraCare, ARCO, ProMatura and the Older People’s Housing Taskforce consistently highlight improved mental well-being for residents, extended independent living, and reduced pressure on publicly funded health and social care.

HOW IS PRIVATE LATER LIVING PROVIDED?

Later Living is offered through a sale model and, with increasing presence, a rental model.

For sale, the Deferred Management Fee model (sometimes referred to as an Exit Fee model) has been the most widely adopted in the UK Later Living market. Under this structure, purchasers buy their home outright and pay an ongoing service charge to cover the maintenance of communal areas and shared amenities. On resale, a proportion of the property value, ranging from 1-35% depending on the scheme, is retained by the developer/operator as the Deferred Management Fee (DMF). From 2023, ground rents on new Later Living properties were banned, with the government proposing 2026 legislation aimed at capping existing ground rents at £250 a year, eventually dropping to £0 after 40 years.

While service charges are structured to remain relatively affordable, covering day‑to‑day running costs and upkeep, DMFs are intended to support longer‑term capital investment. This helps maintain the quality of homes and shared amenities, supports resale liquidity and often contributes to a return on the developer/operator’s upfront investment. As a result, aligning amenity provision with resident preferences is critical to ensure that both service charges and DMFs reflect what residents genuinely value, use and are willing to pay for. Whilst government reforms introduced in 2024 have sought to improve transparency around DMFs, consumer understanding remains limited and perceptions of the model are often cautious.

Rental models offer a less complex set-up, like conventional renting; residents pay a monthly charge for their home, with service costs either billed separately or bundled into a single payment. Reflecting rising demand and increasingly mixed consumer preferences, a growing number of developer/operators are introducing rental offerings across the Later Living market. For example, Pegasus Homes is transitioning from a for-sale developer to a build-to-rent developer and operator, and McCarthy & Stone reports that rental enquiries have more than doubled over the past six years.

While home ownership remains the preference for many, renting offers:

• Flexibility and optionality: Greater flexibility at a stage of life where circumstances may change, avoiding long‑term capital lock‑in and allowing residents to move more easily if needs or personal situations change
• Stamp duty savings: Avoids large upfront transaction costs. In higher‑value markets, stamp duty alone can be equivalent to several years’ rent, making rental a financially rational option even where asset values are high
• Affordability and predictability: Provides clear, predictable monthly outgoings without exposure to deferred management fees or resale timing risk, and can improve accessibility for those who are either unable or hesitant to commit to ownership

DEMAND DRIVERS

According to the ONS, 19% of the UK population in 2025 was aged 65 and over; this is projected to increase to almost a quarter (24%) by 2045 and to 29% by 2065. In absolute terms, this equates to an additional 8.1 million people in this age group by 2065 (13.4 million in 2025). Research from the Centre for Ageing Better also indicates that 87% of homes in England do not meet accessibility standards, creating a significant barrier to ageing in place for many.

A significant proportion of this cohort looks to downsize each year, with growing interest in purpose‑built Later Living, but demand does not consistently translate into take‑up. The for‑sale Later Living model is inherently linked to wider housing market conditions and macro‑economic sentiment, and, while the UK market is showing modest recovery, this is yet to drive a meaningful uplift in sales. This is reflective of affordability pressures, the general reluctance to move at an older age, and continued limited consumer understanding. These demand‑side constraints are compounded by limited supply and tenure choice, meaning much downsizing continues to be absorbed by the mainstream housing market. As a result, sales performance can vary significantly by scheme.

Beyond lowering barriers to entry for today’s population aged 65+, the increasing presence of the rental model reflects longer-term trends. The UK Collaborative Centre for Housing Evidence (CaCHE) projects a significant shift towards renting in later life. By 2040, nearly one in four people aged 65 and over are projected to live in rented accommodation. This change is expected to be fuelled by significant growth in private renting, with the share of older people living in the private rented sector increasing from 4% in 2022 to more than 13%, alongside around 11% living in social rented housing. Younger cohorts are also less likely to reach later life as homeowners, meaning ownership could become less prevalent as a tenure preference, driven by both affordability pressures and shifting attitudes towards renting.

SUPPLY

Compared with more mature markets such as the USA and Australia, where 5% to 6% of the over 65+ cohort live in Later Living communities, this is only around 1% in the UK. A significant portion of the total existing stock was developed pre‑1990, reflecting a period of accelerated local authority provision and as a result, the majority of the current supply remains within the social housing sector. More recently, private Integrated Retirement Communities (IRCs) have represented an increasing proportion of development, resulting in a divergence between older, predominantly Retirement Housing and newer, typically higher‑specification IRC schemes.

According to the Older People’s Housing Taskforce, there is a need for between 30,000 and 50,000 new Later Living Homes (inclusive of social housing) delivered annually to meet rising demand. However, average delivery has been only circa 7,000 units per year over the past five years, highlighting a significant and persistent shortfall despite a modest uptick in 2025.

There are several barriers to development:

• Planning: A lack of a clearly defined use class for Later Living creates uncertainty over whether schemes are treated as C2 or C3, with material implications for planning obligations and viability. This is compounded by inconsistent interpretation across local authorities and the absence of explicit prioritisation within many local plans, meaning schemes are often assessed against general housing requirements rather than ageing‑specific needs
• Land availability: Later Living developments require well‑located sites with access to healthcare, transport and local amenities, limiting the pool of suitable land. These sites face strong competition from other residential and alternative uses, driving up values and making site acquisition increasingly challenging for the sector
• High cost: Schemes typically involve higher build costs from the start due to enhanced accessibility requirements and the inclusion of communal and service-led space. Considerable build cost inflation has placed further pressure on margins and can render schemes unviable

INVESTMENT

While investor interest in the UK Later Living sector continues to grow, its relatively early stage of maturity and the limited availability of stabilised stock meant that investment in 2025 remained focused on the expansion of existing platforms. That said, there were clear signs of progress. The merger of Audley Group and Elysian Residences created the UK's largest Later Living platform, while NatWest Group Pension Fund’s move to take full ownership of Inspired Villages highlights the increasing role of long-term institutional capital. Further evidence of this trend came in March this year, when Pension Insurance Corporation (PIC) and US-based King Street Capital Management completed a £130 million financing arrangement with Audley Group to support the growth of its retirement living platform.

Alongside strong ESG credentials, the sector’s transition from a predominantly development-led, for-sale model to a more operational real estate model, driven by the emergence of rental, has further broadened investor appeal. The growing alignment with Build-to-Rent structures, which are more familiar to institutional investors than Deferred Management Fee models, is expected to support increased capital inflows, including from international investors.

Mike Hodges, Managing Director of Capital Markets at Christie & Co and a member of the Senior Housing & Healthcare Association Executive Board, comments: “Compared with registered care homes, the UK Later Living sector is still at a relatively early stage, with there being a particular need for patient capital that is able to take a longer term view given the gestation period needed to develop and lease up schemes of this nature. The evolution of tenure models and, in particular, rental with predictable and sustainable cashflows should broaden the appeal to investors with the mid market likely to offer the greatest degree of opportunity.”

WHAT NEEDS TO CHANGE FOR THE MARKET TO GROW?

Greater optionality

The continued evolution of tenure options, whether that be sale, rental or hybrid models, will be central to improving uptake. The emergence of rental in the UK presents a significant opportunity to address the mid-market gap in a sector that has historically been dominated by premium, for-sale schemes. While rental provides the most immediate route to broadening access, a wider mix of tenure options across different price points and specifications will widen overall market appeal.

At the same time, increasing flexibility in payment structures for sale is helping improve uptake. As maximum DMF percentage levels have increased, providers have introduced more flexible models around how and when residents pay. For example, ‘save now, pay later’ options allow residents to reduce ongoing service charges in exchange for a higher DMF on exit. This plays an important role in improving affordability and softening negative perceptions of the model.

Underwriting uncertainty and limited exit evidence

The relative lack of transparent performance data and realised investor exits continues to constrain capital deployment. Without clear benchmarks on uptake rates, pricing, operational performance and exit routes, underwriting remains challenging - particularly for new entrants to the sector. While there is clear investor appetite, greater transparency will be key to accelerating capital deployment. In this context, a more consistent, industry-wide approach to data sharing could play an important role in unlocking further investment.

Planning constraints

Increasing the supply of Later Living housing plays a broader role in addressing the UK’s housing shortage. Enabling older households to ‘right-size’ will help release under‑occupied family housing back to the market, an important consideration given the high proportion of unused bedrooms within owner-occupied homes among those aged 65 and over.

Despite this clear strategic benefit, Later Living is not consistently recognised as essential housing within the planning system. Greater clarity within planning policy, alongside improved understanding at a local authority level, would help accelerate delivery. This includes clearer recognition of Later Living as a distinct housing typology, as well as a more consistent assessment of need within local planning strategies to support both viability and pipeline growth. 

A more customer-led development approach

Historically, parts of the sector have operated on a ‘build, and they will come’ basis. Future growth will require a more demand-led approach, underpinned by a deeper understanding of the preferences and aspirations of both current and future generations of older people. Success will depend on delivering what residents genuinely value, whether that is affordability, community, lifestyle, design quality or access to care - rather than relying solely on demographic demand.

This extends beyond individual homes to the creation of environments that support wellbeing, independence, and intergenerational activity. Thoughtful placemaking, high-quality design and stronger integration within wider communities are likely to become increasingly important as the sector evolves, recognising Later Living as part of the wider fabric of neighbourhoods rather than a standalone housing product.

Public perception and consumer education

Perception remains a major blocker. Later Living is still often viewed through the lens of care or dependency, when in reality it offers individual independence for longer. There remains a clear disconnect between how the sector is perceived and how it is experienced by residents.

Bridging that gap is critical. Better education, both around the product itself and how it is paid for, will help normalise the sector and support demand. While some operators and Later Living promotion groups are already making progress, more targeted positioning of Later Living as a positive next-life-stage move is needed to shift perceptions.

Christie & Co is a member of ARCO and SHHA. We continue to advise clients across the Later Living spectrum, providing market intelligence, valuation expertise, and strategic guidance to navigate this evolving sector. To discuss the Later Living market in more detail, contact Emily Brown: emily.brown@christie.com / 07754 559532 or Mike Hodges: michael.hodges@christie.com / 07764 241 300