Demand for UK residential care is outstripping supply as thousands of smaller care homes face closure

The care home sector is failing to keep up with the demand of residential care and the situation is set to worsen as thousands of smaller care homes face closure due to financial hardship caused by COVID-19, says a new report.

The research by global property adviser Knight Frank reveals the care home sector in Britain has seen a minimal increase in the number of beds but this is not keeping up with the demand for residential care by those aged 85 and over.

The annual UK Healthcare Development Opportunities 2020 research report shows while the number of care home beds rose by 2,500 in the last financial year, the number of homes dropped to 12,170 nationwide.

The fall in the number of care homes was driven by smaller, older care homes closing and a rise in larger, purpose built care homes. The report also found that although occupancy has declined by 6-10 per cent during the pandemic, this is much lower than predicted at the outset and it is smaller, independent care homes that will bear the brunt of this.

Ageing population and pandemic triggering care home crisis

Julian Evans, head of healthcare at Knight Frank, said: “The UK healthcare industry requires substantial investment in order to keep pace with present demand, let alone the provision that is going to be needed for the future as the population continues to age. Whilst the overall bed numbers have increased, this is still nowhere near enough to address the crisis in provision and is likely to be further exacerbated as the next generation ages at a faster rate than new care homes can be developed.”

He added: “This has been accelerated by the COVID-19 pandemic which has accelerated trends that will lead to closures of care homes that are no longer fit for purpose, resulting in a significant national shortfall of bed provision.

“Once the situation resolves around the COVID-19 crisis, we will see numerous changes around how operators fare and we expect that with the scarcity of stock and a continuing ageing population driving demand, the investment appetite for care home developments will remain strong from a range of investors.”

New development must 'keep pace' with ageing population

The report highlights that the number of care home beds per 100 people over the age of 85 has fallen from 33.7 to 28.7 since 2010. If the same rate of growth in beds is applied to the next decade, ‘bed provision will fall much further unless new development increases to keep pace with our rapidly growing elderly population’.

In terms of the pandemic, Knight Frank reveals that despite the high number of deaths from the virus in care homes and individual homes being affected, ‘operators have collectively dealt with the pandemic incredibly well’. The report found that ‘occupancy has typically declined between 6-10 per cent – much less than what many feared at the onset of COVID-19’.

‘Crucially, mortality rates have now normalised and new admissions are also steadily returning. Additional waves of the virus are a possibility, but the strict infection control demonstrated by the sector so far suggests most operators are well-prepared,’ according to the research.

The report concludes that although ‘its been a difficult period for many, it's important to remember that even a worse case death toll will not be enough to derail the growth in our elderly population in the approaching decades.

‘As the current baby boom generation (currently aged 55-75) enters old age, we will see the over 85 population grow from 1.6 million in 2020 to 3.7 million by 2050. Inevitably, the longterm demographics will continue to drive bed demand.’

As many as 6,500 small care homes are at risk of closure

Knight Frank predicts the small, older care homes will be most affected by the pandemic as they will find it harder to cope with the occupancy loss and it points that there are over 6,500 care homes which have 40 beds or less and half of these care homes do not have en suite facilities or wet room provision which is needed to support social distancing.

It also sees COVID-19 impacting on future designs for care homes, with wider corridors to enable social distancing and larger rooms with full en suite and wet room facilities as standard to promote resident isolation, adapted fixtures and fittings to limit touch points and safer visitor areas with enhanced communication systems.

Five top areas for investment in England and Wales

The Knight Frank UK Care Home Development Index predicts the five top areas for investment and development in England and Wales are Buckinghamshire, Greater London, South Glamorgan, Berkshire and Cambridgeshire.

Mandip Bhogal, healthcare development consultant for Knight Frank, said: “Demand for modern purpose-built and future-proof care facilities will only continue to increase, owing to our ageing population and the national care bed crisis we face with many care homes in the market currently not up to standard.

“Although the rate of care home closures may accelerate in the aftermath of COVID-19, construction activity has returned and the longterm demand story is unchanged. In the next 18 months, we expect to see the repositioning of existing care homes as they look to adapt to a post COVID-19 environment.”

To read the full report click here