• Martyn Jenkins

Planning for an Ageing Population – an Overview of the Care Home Market, by Martyn Jenkins

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My last blog set the scene on how demographic changes to the national population are increasing the need for specialist accommodation for the elderly.

Here, in the second of three blogs, I assess the current care home market, highlighting some of the difficulties it is facing, and how this is leading to a growing imbalance between demand and supply.

 

A troubled market…

Against the backdrop of powerful demand drivers highlighted in our first blog, the number of residential care home places in the UK has become a growing issue, with recent evidence pointing to an erosion in supply. The following factors are all seen as contributing to the UK’s “social housing crisis”:

  1. Diminishing supply – the Care Quality Commission’s latest State of Care report revealed that the number of residential care homes has been steadily falling over the past five years, with a substantial decline in 2018 (the number of care homes were down 2.4% in the year to April 2018). Similarly, Knight Frank report that nationally the number of care home de-registrations exceeded the number of registrations in 2018, resulting in a net loss of 117 homes and 388 beds. Six English regions reported a net loss;
     
  2. Rising insolvencies – several financial factors including the introduction of the National Living Wage and rising interest rates (which increase floating debt secured against care home properties) are putting financial strain on existing care homes. These factors have contributed to the number of insolvencies in the market increasing by 83% in the last year, according to the accountancy firm Moore Stephens;
     
  3. Labour shortages – care homes are suffering from nursing and care staff shortages, a factor which is likely to be exacerbated by any impediments to the free movement of labour, as a result of the UK’s proposed departure from the EU; and
     
  4. Public funding – prior to the 2018 Budget, the Government had embarked on a period of austerity, constraining public sector funding. This has had a significant bearing on the funds made available to local authorities to support community care, and consequentially the viability of care homes. In 2017, the Competition and Markets Authority highlighted a £1bn shortfall in public sector funding for care homes.

With demand rising and supply falling amidst a wide spectrum of financial challenges, it is clear we are seeing an increasingly unbalanced market.

I have aimed to quantify this issue.

A worrying imbalance…

Using ready reckoner figures  to estimate demand, and applying this to population data, it is possible to estimate the demand for care home bed spaces across the UK. This can then be compared against supply data from the Care Quality Commission. The resulting (and rather worrying) analysis is set out below.

Map 1: Demand outstrips supply for care homes beds across every region

As the map illustrates, demand outstrips supply for care home bed spaces across every English region based on 2018 figures. Regions where the imbalance is particularly acute are London (-16,311), the South East (-11,531), the West Midlands (-8,657) and the North West (-8,723).

At the national level, the figures are even starker, with our analysis pointing to a shortage of over 65,000 care home beds.

While this analysis is based on standard demand ratios, and may as a result under or overstate the mis-match, it is clear there is an imbalance. The supply of specialised accommodation is being dwarfed by the rate at which our population is ageing, and the resulting need for care home beds.

The analysis supports recent findings from academics at Newcastle University (published in the Lancet medical journal), which found that the UK will need an extra 71,000 care home spaces in the next eight years

So, what can planners do to try and address this imbalance?

Find out in the final part of our trio of blogs.

 

[1] The Housing LIN Shop toolkit provides ready reckoner figures to calculate demand for specialist accommodation such as care homes. These are as follows:

• 65 residential care units per 1,000 population aged 75+

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