Unlocking untapped capacity in the housing market

There is an excellent report (made possible by the brilliant work of Kitty Ussher 's and Ben Page 's teams) which was published by Barclays this week and which discusses the "right-sizing" in the UK housing market, focusing on incentivising homeowners to downsize, thereby freeing up larger homes for families - you can download a copy of the report HERE .

It proposes financial incentives and simplifying the moving process to encourage as many as 3.8 million under-occupiers to downsize. The report also highlights key barriers such as emotional attachment, cost, and stress, which prevent homeowners from moving.

In this write up, I am addressing both the benefits and challenges of such proposals, while carefully reviewing and challenging the numbers where needed. I will then look at how a hybrid version of the model can supplement the proposals while also tackling issues such as loneliness and independent living for longer, therefore also reducing demand on local government through early help & support.

Barclays' Right-Sizing Proposal: some critical analysis first

The Barclays report on "right-sizing" outlines a strategic approach to addressing the UK housing shortage by encouraging under-occupiers, often older homeowners, to downsize. This, they argue, could free up larger homes for younger families and increase housing mobility, potentially unlocking millions of homes currently under-occupied.

The Good Stuff

1. Unlocking Housing Supply: The key advantage of right-sizing is that it aims to reallocate the existing housing stock more efficiently. With 85% of owner-occupied homes containing spare bedrooms, the report suggests that encouraging homeowners to downsize would make larger homes available for growing families. This could create a ripple effect, boosting the housing market by allowing younger buyers to move up the housing chain.
2. Financial Incentives: Barclays recommends targeted financial incentives such as vouchers, grants, and stamp duty offsets to make downsizing more attractive. These could alleviate some of the cost burdens homeowners face, particularly as the complexity and financial cost of moving are major deterrents. For instance, moving costs could be as high as ￡12,000 for a typical property, so mitigating this would likely make the process more appealing.
3. Simplifying the Moving Process: By proposing a joint working group with the housing industry, Barclays aims to simplify the end-to-end moving process, addressing the stress and complexity of moving, cited by 85% of surveyed under-occupiers as a key obstacle. A smoother process could nudge reluctant movers into considering downsizing.
4. Social Benefits: Right-sizing could lead to broader societal benefits by freeing up larger homes in dense urban areas where housing shortages are most severe. Additionally, making more homes available could alleviate some of the pressures on new home building, which is currently facing significant slowdowns due to economic uncertainty and inflation.

The Challenges

1. Emotional Attachment: A major hurdle is the emotional attachment many homeowners have to their properties, with 61% of respondents indicating a reluctance to move due to personal sentiment. This attachment is not easily overcome by financial incentives alone, as homeowners value the memories and stability their homes represent, particularly in later stages of life.
2. Ambiguous Numbers: Barclays suggests that as many as 3.8 million homeowners could be incentivized to downsize, yet this figure is based on several assumptions. For example, while 1.7 million under-occupiers expressed openness to downsizing, how the remaining 2.1 million will be convinced is less clear. Furthermore, Barclays’ proposal assumes a direct correlation between financial incentives and increased mobility, which oversimplifies the complex decision-making process involved in moving homes.
3. Economic Viability: While simplifying the process and offering incentives are promising solutions, there is limited discussion about the overall cost to the government and housing sector. Implementing these proposals could require significant public spending, potentially offsetting any cost savings generated by unlocking housing supply. For example, offering stamp duty rebates would result in immediate revenue losses for the Treasury, making it harder to assess the long-term fiscal sustainability of such policies.
4. Mismatch in Housing Needs: Right-sizing might not always align with the broader needs of the population. Many of the homes freed up by downsizing may be in locations or of types that do not match the demand of younger families, particularly in regions where housing markets are sluggish. Additionally, there is a limited supply of desirable, smaller properties, particularly for older adults looking to downsize, and building more age-suitable homes will take time.
5. Stress and Complexity: While Barclays recommends simplifying the moving process, the reality is that moving homes is inherently stressful, particularly for older adults. Even with streamlined processes, logistical challenges such as decluttering a long-lived-in home, adjusting to a new environment, and dealing with the physical and emotional toll of moving could deter many from following through with right-sizing.

The Hybrid Model

While Barclays' right-sizing proposal definitely has merit, particularly in its focus on financial incentives and easing the moving process, it underestimates the deeper psychological and practical barriers many homeowners face. The assumption that financial measures alone can drive significant behavioural change underestimates the complexity of the housing market and personal decision-making.

An alternative model could be a hybrid approach, combining right-sizing with a focus on intergenerational co-living options and in-home care solutions. This could encourage homeowners to convert spare rooms into rental units for younger families or carers, providing income while allowing older homeowners to remain in their homes. Additionally, investing in shared equity schemes could allow older homeowners to downsize without fully selling their property, providing them with financial flexibility while keeping some ownership.

Lastly, policy changes should focus on building a wider range of smaller, affordable properties in regions where demand is highest, thus addressing both the supply and demand sides of the equation in a more balanced manner. Rather than relying solely on financial incentives, a broader, multifaceted approach could better address the UK's complex housing market needs.

Promoting Homeshare as part of a Hybrid Model

A complementary solution to Barclays’ right-sizing proposal is Homeshare, which is well-represented by organizations like Two Generations (www.TwoGenerations.co.uk ). Homeshare connects older homeowners with younger people or carers, offering affordable living space in exchange for companionship and assistance, effectively addressing loneliness and supporting independent living for longer. This intergenerational co-living model aligns with the hybrid approach of making better use of under-occupied homes while fostering community and reducing isolation.

Homeshare benefits both parties: older adults can stay in their homes longer, receiving light support and companionship, while younger individuals gain affordable housing. This alternative not only supports tackling the housing crisis but also creates a meaningful social impact by enhancing well-being for older generations. Homeshare helps facilitate these arrangements, fostering mutual benefit through shared living, which can significantly ease housing demand and support aging populations.

Incorporating Homeshare into the policy mix alongside traditional right-sizing offers a more comprehensive, sustainable approach to optimizing housing stock and addressing the personal needs of older adults without requiring them to move. This solution supports a broader societal goal of maintaining independence and well-being as people age, while at the same time creating a sense of purpose and connection across generations.