Discover senior housing investments and supported living opportunities with Fraser Bond's tailored advice.
One planning question governs the economics of this whole asset class, and it has never been properly settled. Is the scheme Class C2, a residential institution, or Class C3, dwellings? It decides affordable housing contributions, CIL, permitted development rights and resale. And the courts have made clear it turns on how the units are actually used — self-contained flats with their own front door, kitchen and bathroom can be dwellings even where substantial care is provided.
C2 or C3 decides affordable housing, CIL, permitted development and what you can do on exit. It is determined by how the units are used rather than by what the scheme is called, and a consent granted as C2 does not settle it if the units function as dwellings.
Extra care and supported living usually involve personal care delivered to people in their own homes — a regulated activity registered to the care provider, not to the building. That is a different position from a care home, where the registration attaches to the location as well.
Rent from residents, housing benefit or exempt accommodation rates, local authority care fees, or a lease to an operator or housing association. Each has a different covenant and a different sensitivity to policy. We separate them rather than quoting a blended yield.
Our fee is paid by the vendor. No acquisition fee and no retainer — and no reason for us to present a use class position more favourably than the consent and the facts support.
A trading extra care scheme, a block let to a supported living provider, a group home, or a building to convert. The diligence, the covenant and the planning risk are different in each case.
Use class and how it was determined, the consent and its conditions, who holds the care registration, tenancy or lease structure, the funding route behind the income, and the physical suitability of the building.
Where the use class is arguable, that is a real number — affordable housing contributions and CIL on a scheme assumed to be exempt can change the appraisal completely. We would rather quantify it at offer stage than have it emerge in diligence.
Class C2 covers residential institutions — care homes, nursing homes, hospitals. Class C3 covers dwellinghouses. Extra care and assisted living sit awkwardly between them, because residents typically occupy self-contained flats with their own front door, kitchen and bathroom while receiving care on site.
The distinction is not academic. It decides whether affordable housing policy applies, whether CIL is payable, what permitted development rights attach, and what restrictions bind on resale. Schemes have historically been promoted as C2 partly because C2 frequently escaped affordable housing requirements.
National planning practice guidance, published in 2019, suggests looking at the level of care and the scale of communal facilities — but it leaves the decision to the local authority and does not address the sui generis option at all. The practical consequence is that local policy wording matters more than the national position. Some policies apply affordable housing requirements to ‘dwellings’ generally and some to specified use classes, and that single drafting choice can decide whether a scheme carries a 30 or 40 per cent obligation. Read the adopted local plan before you price the site.
In a care home, the regulated activity is accommodation for persons who require nursing or personal care, and registration attaches to the location as well as the provider — which is why buying a care home means a fresh registration rather than a transfer.
In extra care and supported living, residents generally hold their own tenancy or lease and receive personal care in their own home. That is a domiciliary care service, registered to the provider. The building itself is housing. For an investor that is a materially different risk: you are not dependent on a location registration, but you are dependent on a care provider whose registration and reputation sit outside your control, and on the commissioning that funds them.
It also means the label on a listing tells you very little. A scheme described as ‘supported living ready’ may be an ordinary residential block with no care arrangement in place at all, and one described as a care asset may be housing with a domiciliary contract attached. Establish which, and establish who holds what, before you underwrite the income.
Income in this sector arrives through several routes and they behave differently. Rent from residents, sometimes met through housing benefit at exempt accommodation rates where the scheme qualifies. Care fees from a local authority or integrated care board, paid to the provider rather than to you. Or a lease to an operator or registered provider, in which case your covenant is that organisation and the underlying funding is one step removed.
Where units are sold on long leases, the ordinary leasehold framework applies with some sector-specific features. Ground rents on new leases have been peppercorn since 30 June 2022, and the ban was extended to retirement housing from 1 April 2023. Service charges are subject to the usual statutory controls, including section 20 consultation above £250 per leaseholder for works and £100 per leaseholder per year for long-term agreements.
The distinctive feature is the event fee — variously a deferred management charge, transfer fee or exit fee, payable on sale or sublet and often calculated as a percentage of the sale price. They are lawful and they can be perfectly reasonable, but they are frequently poorly understood by buyers and they materially affect resale values. The Law Commission recommended a statutory code and greater transparency; that has not been legislated. On any scheme with event fees, establish the trigger, the percentage, what it is calculated on and how it is disclosed to purchasers.
Several assets in this category are former care or convalescent homes being sold for conversion, and the arithmetic there is a development appraisal rather than an income one. Expect the usual profile: single-storey or deep-plan layouts that resist subdivision into compliant flats, asbestos in anything built before 2000, ageing plant, and services sized for an institutional use.
Then the standards. Self-contained units need to meet space standards where they apply, and accessible and adaptable dwelling standards are commonly required by local policy on schemes of this kind. Lift provision, corridor widths, turning circles, level access and wet room capability are not optional extras in this market — they are what makes the units lettable to the people they are built for, and retrofitting them into a building that was not designed for it is where conversion appraisals usually go wrong.
It depends on how the units are actually used, not on what the scheme is called. C2 covers residential institutions and C3 covers dwellings, and extra care sits between them because residents typically occupy self-contained flats while receiving care on site. In Rectory Homes v Secretary of State the High Court held that retirement units with their own front door, kitchen and bathroom were dwellings despite the care provided, and noted that falling within a use class does not stop something also being a dwelling. A consent granted as C2 does not settle the question.
Because it decides the economics. Affordable housing contributions, CIL liability, permitted development rights and resale restrictions all turn on it, and schemes have historically been promoted as C2 partly because C2 often escaped affordable housing requirements. National planning practice guidance from 2019 points to the level of care and the scale of communal facilities but leaves the decision to the local authority. In practice local policy wording is decisive — whether it applies requirements to ‘dwellings’ generally or to named use classes can change a scheme by tens of percentage points.
Usually not, and it works differently from a care home. In a care home the regulated activity is accommodation with nursing or personal care, and registration attaches to the location as well as the provider. In extra care and supported living, residents hold their own tenancy or lease and receive personal care in their own home — a domiciliary service registered to the provider. The building is housing. So you are not dependent on a location registration, but you are dependent on a provider whose registration and commissioning relationships sit outside your control.
They are charges payable on sale or sublet of a unit, variously called deferred management charges, transfer fees or exit fees, often calculated as a percentage of the sale price. They are lawful and can be entirely reasonable, but they are frequently poorly understood by buyers and they materially affect resale values. The Law Commission recommended a statutory code and greater transparency and that has not been legislated. On any scheme with event fees, establish the trigger, the percentage, what it is calculated on, and how clearly it is disclosed to purchasers.
Treat it as a development appraisal rather than an income one. Former care and convalescent homes are commonly single-storey or deep-plan and resist subdivision into compliant self-contained flats; expect asbestos in anything pre-2000, ageing plant and institutionally sized services. Then the standards that make units lettable to this market: lift provision, corridor widths, turning circles, level access and wet room capability. Retrofitting accessibility into a building not designed for it is where these appraisals most often go wrong.
