Money Matters Margaret Dibben
Selling the house it took years to buy and choosing instead to rent in your retirement sounds illogical. In the UK, home-owning is so much part of the national psyche that renting is regarded as a second-rate option. But, increasingly, older people are doing just that, and it is forecast that by 2040 a third of the over-sixties could be renting privately.
Many older people downsize to smaller, cheaper homes to release money to help children and grandchildren, and to reduce the effort of looking after a large property. Stepping off the property ladder completely is a bigger jump though it has its attractions: you no longer have to deal with the hassle and expense of maintenance and repairs; you can pay off your debts; or perhaps divorce has left you without enough money for a new house.
The biggest problem is that the landlord, not you, decides how long you can stay in your new home.
Assured shorthold tenancies have distorted the private rental market and turned it largely into a short-term only arrangement with no security. When the fixed-term lease ends, after six or 12 months, landlords can throw you out if they decide to live in the property themselves or sell it. You can never be confident that you will be able to stay in your home for as long as you want.
This is a serious disadvantage because, as you get older, the upheaval of
finding somewhere new to live can be traumatic. Also you are less likely to find landlords who are prepared to take on elderly tenants, because they might not want to install mobility aids such as handrails and ramps.
A year ago, Scotland abolished fixed-term tenancies – so tenants cannot be evicted on a whim. The government in England is now proposing a minimum three-year term, with a six-month break clause; still, there is no restriction on rent rises so this is only a partial improvement. You can be more secure by renting in a purpose-built development, but this can be an expensive option.
Adding to the costs, renting involves paying fees to letting agents, though legislation trundling through Parliament will, from 2019, abolish upfront lettingagent fees. Fees have been illegal in Scotland since 1984.
If money in the long term is your main consideration in giving up home ownership, there are tax implications. You will no longer benefit from the inheritance tax main-residence nil-rate band, which allows extra tax relief if you leave your home to a direct descendant when you die.
In the short term, you will have banked a tax-free profit on your house.
Despite the proposed changes, the private rental market is not ideal for older renters. There is no security of tenure and no rent control, and privately rented properties are often poorer quality than social housing. The system needs a substantial overhaul before it is satisfactory for the increasing numbers of elderly renters.