Why is it so Hard for Older People to Downsize?

With the housing crisis hitting younger people hard – particularly in London – it would appear sensible, on the surface, for older people to downsize so that younger people can find somewhere to live with a bit more space.

So, why is this hardly happening? The answer is that it often actually costs more to downsize than stay where you are; living somewhere smaller can be more expensive.

Moving house in London can cost at least £30,000 just for the stamp duty, solicitors’ and surveyors’ fees and removal costs – and that doesn’t take into account that smaller houses are not necessarily much cheaper.

The value of a house doesn’t increase necessarily in proportion with size and older people may find that the drop in price of a smaller property will be subsumed by the costs of moving. When you place that fact alongside the aggravation of moving, it’s no wonder that older people prefer to stay in their larger homes, even if they do cost more to heat.

Moving house in London can cost at least £30,000

Even getting a mortgage to cover costs at an older age is almost impossible. Most lenders are reluctant to take on older people who may not have as long left to pay off the loan – even if they do have a decent amount of savings.

A person’s home is not just bricks and mortar, or an investment for an individual; homes hold treasured memories and echoes of the past that people find difficult to break ties with.

Your home is the place where you brought up your children, where you spent time with friends and loved ones. Why leave all that behind when there is no financial incentive to downsize and you’re approaching a time when you want to be in familiar surroundings?

Until the government introduces some sort of motivation such as tax relief on people downsizing home, it looks like we will continue to have a generation of older people living in homes that may now be too big for them, but make sense in every other way.

Janine Aldridge

Janine is the Development Officer for Healthwatch City of London

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2 thoughts on “Why is it so Hard for Older People to Downsize?

  1. I agree with Christopher that a house is more than just a pot of cash. In addition there is a huge shortage of good quality smaller accommodation (and a variety of different types of accommodation) for older people to move to. For anyone undergoing change there is an inevitable sense of loss about leaving somewhere/something/someone behind until you cross that point of looking forward to where you are going to something/someone new. If there is not a lovely, age appropriate smaller property to move to, downsizing is always going to represent loss. At erosh we campaign for and promote good quality housing of all different types (including specialist sheltered and retirement housing) for older people and sufficient alternatives so older people can make a positive choice to downsize from their family home.

  2. I think that the main point in your article is the one about the property being more than just a house, but a home too.
    I struggle to think why anyone would voluntarily want to leave a familiar environment to take on a new, smaller property unless it were – for example – to be closer to family and friends or another support network. Not only is the house itself familiar, but so are the neighbours, the local shops, the place of worship and so on.
    From a financial perspective, the larger property will often contain a significant amount of equity which can be released either in the form of a lump sum or as a stream of additional income if required to support the owner and/or also represents the biggest asset that most people leave to others in their Will.
    If being assessed for financial support by a Local Authority (perhaps for Council Tax Rebate or for free personal care in the event of a long-term medical condition) then the house is excluded from the calculations as long as the owner is in residence, meaning that the savings threshold is less likely to be reached. If, on the other hand, they had downsized, moved to a cheaper property and thereby generated a cash sum that was placed on deposit in the bank, then this would be fully liable for assessment and may mean that they could be deemed to be able to pay themselves and would no longer receive the benefits that might have otherwise been awarded.

    Most older clients with properties are asset rich with modest incomes.
    Much of their income is covered by the personal allowance, and of course there is no tax to pay when they sell their home. Thus I am not sure what sort of tax relief is available that would even act as a financial incentive. Certainly it would need to be a substantial figure if it were to make up for the potential loss of benefits.

    My professional body, the Personal Finance Society, maintains a directory of specialist Later Life Advisers and I would encourage clients and client families to talk through the repercussions before making any decisions.

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