Q&A with Birchgrove’s CEO, Honor Barratt

BTR News in conversation with Birchgrove's CEO, Honor Barratt about the company's Build to Rent retirement model.

Honor Barratt, CEO of Birchgrove | BTR News
Honor Barratt, CEO of Birchgrove.

We spoke with Honor Barratt, CEO of Birchgrove, a provider of Build to Rent retirement homes about the rental-in-retirement model, its scalability, hurdles, challenges and more.

How does the Birchgrove rental-in-retirement model differ from the traditional senior living model?

We do exactly what it says on the tin! For those over-65s who don’t want to manage another property purchase, and who want to free themselves from the burdens of home ownership, the opportunity to rent a high-quality apartment in a purpose-built development that offers exceptional communal facilities.

Why, you may ask, would elderly people wish to rent? First and foremost, renting enables retirees who have sold their family home to free up a considerable amount of equity – be it for themselves to invest or put towards travelling, or to financially support children and grandchildren.

We also remove the burdens and expenses of home ownership and give owners far more flexibility should their circumstances change. The rental model eliminates stamp duty and exit fee liabilities, and means families aren’t saddled with trying to sell the property when the occupier passes away.

We also know that, for every one resident that joins one of our communities, a property with on average 2.3 underoccupied bedrooms is freed up, thereby helping tackle the wider housing shortage and reducing the need to develop on greenbelt land. This means everyone is a winner.

Renting in retirement isn’t for everyone, but it is, increasingly, perfect for some – and that is the growing demand we are working to satisfy.

In the US, renting in retirement is an established option – one that is very much part of the senior living fabric. It is estimated that more than a fifth of over-65s, or 7.4 million Americans, rent.

In the UK, around 400,000 over-65 households rent, but the purpose-built rental-in-retirement model only arrived in the last decade. To put this in perspective: as the UK’s leading provider of retirement rental homes, our portfolio comprises of three operating retirement communities across the South East, with six further communities either under construction or with sites acquired.

Sometimes this lack of penetration makes us feel like the underachievers, but we know there is huge potential for growth. In the UK, the number of over-65 households renting is set to more than double – to over one million by 2033. So, whilst we’re behind the US market in terms of maturity, I am very confident the market here can develop to the same extent as in the US.

What kind of hurdles and challenges are you experiencing as the model continues to develop?

As of today, we face a triple-whammy of attitudinal, financial and regulatory challenges in the retiree Build to Rent space.

Attitude-wise, we’ve all been conditioned since the 60s, and especially since Thatcher, to aspire to home ownership. For many elderly people, the idea of shifting from ownership back to rental is seen as regressive, therefore. While renting in retirement isn’t for everyone, the more retirees that successfully rent, the more retirees will consider, and potentially benefit from, the model. Doing so will take time and requires us to be more flexible in our approach to home ownership in later life.

Financially, the retiree Build to Rent market urgently requires both greater private investment, and, by extension, more competition. It may seem strange for the CEO of a retiree Build to Rent developer to be calling for more market competition, but the scale of growing demand means more players in the market are desperately needed than the handful that operate today.

Finally, the sector is also in real need of greater public sector assistance. Specifically, there remains a dearth of planning officers, and those in the job remain under-resourced. This isn’t to be critical of our planning officers, at all: I am constantly amazed by their performance given the circumstances they find themselves in. But to give you an example of the difficulties in this area, it has taken two years between plans being submitted and a spade being stuck into the ground at one of our new developments.

Birchgrove currently operates in and around the M25 – do you believe your model is scalable nationwide, and perhaps internationally?

So many retirees up and down the country are excluded by the traditional sale model, and so it’s our mission to have a Birchgrove development in every town.

Will this happen overnight? No. Currently, the cost of financing – both debt and equity – means we are focussing on serving more affluent communities across the South East. As we continue to demonstrate proof of concept within the M25, the risk is lowered and the cost of money is subsequently lowered, which enables us to move into other parts of the country.

The lack of competition issue also comes into play here. The more Build to Rent retirement providers that pile into the market, the more competition the sector will have and prices will come down – making retiree rental accommodation a more realistic and affordable prospect across all UK retiree communities.

You previously ran a television production company – how did you transition into retirement living?

I previously ran a television production company, which was bought out by Octopus in 2007. I then stayed with Octopus Private Equity for seven years, where I ran the agency and we expanded into five different countries, with over 120 staff.

Octopus then asked me to look at one of their businesses centred around retirees. So, I trundled down the M4 and within 90 minutes was completely hooked on how compelling old people are as company and mentors. It was at this point I transitioned to the retirement business, and I haven’t looked back since.

Are there any similarities between TV and retirement living? TV is really insight driven, and within certain genres – for example, kids TV – you have different segments, ranging from toddlers and teenagers. Technically anyone over 65 could be a retiree, but plenty of over-65s want different things and there are many different sub-sectors within this demographic too. So we are also extremely insight driven to ensure we cater for everyone.