Can Intergenerational Living Work Commercially?

This is the third in a series of articles we are presenting on intergenerational living. We would welcome views on this article or intergenerational living. In this article we look at critical issue of how inter-generational living can work commercially.

We note that with the advent of the new PM there is a welcomed discussion emerging on intergenerational activities, linked to Social Care reform. Evan Davies on PM Radio 4 on Wednesday 29th July addressed the matter with an article about a Huddersfield gym – was it beneficial and who to?

In our previous articles we presented that intergenerational living should not be viewed as another housing product. It is an operating model. If that is true, the obvious question follows.

Can it actually work commercially?

It is perhaps the question we are asked most often and a critical question if it is to gain momentum. The short answer is YES, but it depends entirely on how the scheme is conceived from the outset.

If intergenerational proposals begin with a residential development and then try to retrofit community afterwards. We believe that approach almost certain to struggle.

Instead, commercial success comes from recognising that housing, stewardship, placemaking and long-term management are all part of the same development model.

The commercial reality

The property industry is understandably cautious.

• Development finance prefers certainty.
• Valuers rely upon established evidence.
• Institutional investors seek predictable income.
• Planning authorities must balance policy with viability.
• Developers need schemes that can actually be delivered.

None of these are obstacles. They are simply commercial realities.

The challenge is that genuinely intergenerational communities sit across a number of sectors simultaneously.

• Housing.
• Health.
• Regeneration.
• Community.
• Investment.

No single discipline currently owns the model. There are advocates but they are disparate.

Planning is not the problem

Planning policy increasingly supports:

• healthy places;
• mixed communities;
• walkability;
• ageing well;
• active travel; and,
• social infrastructure

In many respects, planning is already pointing in the right direction.

The bigger challenge is translating those aspirations into commercially deliverable developments and planning joining up wider aspirations. Policies describe the destination. They rarely explain the vehicle.

Valuation still rewards certainty

Valuers work from evidence. Comparable evidence. That is entirely appropriate.

But innovative products inevitably begin with little direct evidence.

The industry therefore tends to value certainty rather than innovation.

Ironically, once enough successful schemes are delivered, they become the very comparables future developments rely upon.

Somebody has to build the first examples, so there is a sufficient critical mass.

Finance follows confidence

Investors rarely reject good ideas. They reject unmanaged risk.

The question is therefore not whether intergenerational living is investable.

It is whether the development model provides sufficient confidence around:

• demand;
• operational performance;
• resident retention;
• income; and,
• long-term asset quality.

Increasingly, Build to Rent demonstrates that investors are prepared to back operational real estate rather than simply physical buildings.

That should encourage the industry.

Stewardship creates value

Perhaps the biggest commercial misunderstanding is that stewardship is simply another operating cost.

We see it differently. Stewardship protects value.

Communities are where people know one another. Neighbourhoods people are proud to live in.

Developments where residents stay longer. Places that support local businesses.

These are not just social outcomes. They become commercial outcomes. Long-term investors increasingly understand this.

The opportunity for ethical capitalism

At Whatif..., we often talk about ethical capitalism.

Not because commercial returns matter less.

Because we believe they matter more when they are sustainable.

For investors intergenerational developments provide bucket loads of ESG.

The most successful developments of the future are unlikely to be those that simply maximise Gross Development Value on day one.

They will be those that continue creating good values twenty years later:

• value for residents;
• value for investors;
• value for local authorities / NHS and Social Care;
• value for surrounding businesses; and,
• value for society.

That is a much bigger ambition than simply building apartments.

A different delivery model

So, can intergenerational living work commercially? We believe it can.

But not through traditional development thinking alone. It requires landowners (optional) developers, operators, investors and public sector partners to work together from the outset.

It requires stewardship to be considered alongside development and architecture.

It requires community to be viewed as an investment rather than an afterthought. Above all, it requires a shift in mindset.

The question is no longer: Can we afford to invest in stronger communities? The better question may be: Can we afford not to?

Looking ahead

Intergenerational living is still an emerging market in the UK. That should not be viewed as a weakness. It is an opportunity.

The organisations that succeed will not necessarily be those that build the most homes. They will be those that understand how to create communities that people choose to remain part of.

At Whatif..., we believe that is where the future of real estate is heading.

Not simply towards better buildings but better places.

Development creates buildings. Stewardship creates communities. Long-term value needs both. This is what a successful intergenerational neighbourhood actually looks like in practice.