Is Commonhold the Best Model for the Later Living Sector
The Governments latest proposals have recently bought commonhold back into the spotlight, now positioned as the future of residential ownership in England and Wales.
Commonhold ownership has been around for more than two decades, first introduced under the Commonhold and Leasehold Reform Act 2002. Initially developed as an alternative form of ownership, commonhold was intended to address perceived shortcomings within the leasehold system by increasing resident control and reducing reliance on traditional landlord and tenant structures. For many parts of the housing market, that ambition appears entirely reasonable, however whether it can achieve those objectives in practice remains the subject of considerable debate within the leasehold property sector at large.
Greater resident control is often presented as a positive objective, although the extent to which residents wish to assume responsibility for complex building and community management is not always straightforward.
For IRC specifically, the challenge is that later living is not a single housing product. It encompasses everything from age-restricted apartments through to integrated retirement communities with extensive communal facilities hospitality provision and care support. Applying the same ownership framework across this entire spectrum risks ignoring the very different operational realities that exist within it.
The Problem with Treating Later Living as One Sector
Historically, one of the weaknesses in housing policy has been the tendency to group all housing for older people together. From a development, design and planning perspective, a retirement apartment scheme and an integrated retirement community may appear broadly similar, but operationally, they can be worlds apart.
Retirement housing, also known as sheltered housing, is effectively conventional homeownership apartments with an age restriction attached. Residents own their property, live independently and use a relatively modest range of communal facilities. In many respects, these developments operate in much the same way as any other apartment building.
It is difficult to argue that commonhold should not be capable of working in these environments, given its similarities to the current Right to Manage (RTM) framework.
The picture becomes considerably more complicated as we start to look at developments with more extensive care provision, support services and varying financial models.
Integrated Retirement Communities (IRCs), sometimes referred to as extra care, or assisted living schemes are not simply property ownership products. They are service-intensive environments that rely upon professional management, long-term operational planning and the continuous delivery of support services.
Proponents of commonhold argue that it could address a number of criticisms levelled at the current leasehold ownership model - residents collectively control the management of communal areas, and the potential conflicts between freeholders and leaseholders are reduced.
It is understandable why the Government is attracted to commonhold as a potential alternative ownership structure, although the practical implications for more complex housing products remain less certain.
Leasehold law is complex, and in some areas, very outdated. Through the most recent Ministry of Housing, Communities & Local Government (MHCLG) consultations, the Government is focused on addressing issues surrounding service charges, enfranchisement, ground rents and management rights... Commonhold offers the possibility of removing many of these layers entirely.
For simpler later living developments, particularly those with limited communal facilities, some of these benefits may be achievable.. The difficulty is that later living often extends far beyond the management of buildings alone.
Commonhold has been designed to manage buildings, but does it manage communities?
Managing Communities
IRCs are recognised for having extensive communal infrastructure. Restaurants, lounges, wellness facilities, guest suites, transport services, care coordination, staffing and hospitality functions sit at the heart of the resident experience.
These services require professional oversight. They also require continuity.
A resident-led governance structure may be entirely capable of deciding when a communal hallway should be redecorated. It is far less obvious that the same structure is well suited to making decisions about staffing models, wellbeing services or care provision.
This is where commonhold begins to encounter challenges.
One of the key assumptions behind commonhold is that owners will take an active role in governance and decision-making for their community. While that may be appropriate in many residential settings, it raises questions within later living environments, where residents have often chosen retirement housing precisely because management, maintenance and operational responsibilities are handled on their behalf.
The commonhold model also needs to be considered against the reality that residents' circumstances can change significantly during their time within a community. Responsibilities which are manageable on day one may become more difficult as health, mobility or personal circumstances evolve.
The Governance Challenge
Resident empowerment is one of commonhold's strengths. In later living communities, however, the more difficult question is how governance operates when residents have differing needs, priorities and expectations.
Who decides when service levels should increase or decrease?
Who determines whether expenditure is necessary?
Who takes responsibility when difficult decisions need to be made?
In a later living environment, these questions can quickly become sensitive with implications beyond property management. Where operational choices influence wellbeing services, staffing levels or support arrangements, the distinction between community governance and service delivery becomes less clear.
For many operators, that feels uncomfortable, and likely to feel even more uncomfortable for residents.
There are also practical concerns regarding confidentiality, safeguarding and accountability.
Existing operating models benefit from clearly defined responsibilities, allowing residents to understand who is delivering services, who sets standards and who is accountable. A purely resident-led governance model risks blurring those lines.
This does not mean commonhold cannot work. It simply means that the commonhold structure designed will require significant adaptation before it could ever support the more complex later living environments.
Will investors fund commonhold retirement communities at scale?
The later living sector remains heavily dependent on long-term investment.
Developing later living housing and retirement communities designed for older people requires substantial upfront capital and confidence in future operational performance.
Many IRCs rely upon carefully balanced financial models, allowing residents the opportunity to reduce ongoing annual costs in exchange for deferred management fees payable on resale or assignment. This provides operators with a degree of long-term income certainty, helping to support the delivery of services and communal facilities throughout the life of the scheme, whilst remaining affordable for residents.
Deferred management fee models have become one of the defining features of the UK retirement community sector. For many residents, the ability to reduce ongoing service charges during occupation and instead contribute through a deferred fee payable on resale has proven highly attractive. The model can improve affordability, align costs with the point at which housing wealth is realised and help support the extensive communal facilities and services that distinguish IRCs from mainstream residential developments.
Importantly, these arrangements depend upon long-term custodial ownership and access to patient capital. Operators and investors effectively assume the risk associated with recovering a proportion of costs many years into the future, often with limited certainty as to the timing of repayment. That risk is underwritten by stable ownership structures and long-term operational control.
It is far from clear how such arrangements would operate within a commonhold framework. If ownership and management responsibilities become fragmented, investors may be less willing to fund deferred fee models or may require alternative charging structures that increase costs during occupation. Any reduction in the availability of deferred fee arrangements could have significant implications for affordability and consumer choice within the sector.
The removal of traditional ownership structures therefore raises important questions about funding, viability and future lender confidence.
Capital providers favour certainty, predictable operating models and clearly defined rights over future revenue streams. Where regulatory reform creates uncertainty around governance, operational control or the enforceability of deferred income models, investment decisions are likely to become more cautious. This is particularly relevant in a sector that remains heavily dependent on institutional capital to support future development..
It is critical that whatever ownership structure exists, it needs to support the operational realities of the product, therefore, there is a strong argument that IRCs should be treated differently from mainstream residential developments.
For age-restricted retirement housing schemes with limited communal facilities, commonhold appears capable of delivering many of the benefits the Government hopes to achieve. For service-intensive retirement communities, the position is less clear.
There are several successful international models from which lessons can be learned and comparisons drawn. Many international retirement living markets have evolved alongside specialised contractual arrangements that govern service delivery, care provision and community management. The UK debate has often focused heavily on ownership structures, while paying less attention to operational frameworks.
Our verdict: is Commonhold the right solution for Later Living?
The debate around commonhold has increasingly been framed as though a single ownership structure can provide a solution to many of the perceived shortcomings of the residential property market. The later living sector demonstrates why that assumption deserves greater scrutiny.
Whilst commonhold may prove suitable for age-restricted retirement housing with relatively straightforward operational requirements, the case becomes significantly less convincing when applied to Integrated Retirement Communities. The more a community relies upon professional management, hospitality services, wellbeing support and care provision, the harder it becomes to separate ownership from operations.
Ownership and operations should not be separated when reviewing the later living sector. A tenure model that works perfectly for a town-centre apartment block is unlikely to be appropriate for a community delivering wellbeing support, hospitality services and varying levels of care.
Governance, accountability, safeguarding, funding and service continuity all require careful consideration before commonhold can be viewed as a workable ownership solution for the more complex parts of the later living sector.
There is also a risk that the current policy debate has become overly focused on tenure reform whilst paying insufficient attention to the funding and operational models that have enabled the sector to develop. Deferred fee structures, long-term stewardship and institutional investment have all played a significant role in expanding housing choices for older people. Reform should be careful not to undermine those foundations unintentionally.
Commonhold may ultimately have a role to play within parts of the later living market, but it should not be assumed to be the future of the sector as a whole. Any move towards commonhold must recognise the unique characteristics of retirement communities and avoid imposing a framework that risks weakening governance, reducing investment appetite or undermining service delivery in pursuit of a broader policy objective.