To suggest the government incentivising downsizing

[PoinsettiaPosturing]

There seems to be a couple of issues discussed very frequently here that could be potentially helped (not solved) by the government incentivising downsizing for home owners.

There's a significant issue of property availability to buy and rent, and a huge number of older people who are single/couples in 3/4/5 bed houses. This means that younger generations are stuck in their starter homes and priced out of long term homes.
MIL & FIL have a 4 bed detached and constantly complain about the cost to heat and maintain it, but hate that it'll cost them loads in stamp duty, moving fees & solicitors costs to downsize.

Perhaps Rishi could incentivise downsizing, so if you reduce the number of bedrooms when you move it over 60, then you're relieved of stamp duty, and perhaps receive a £2,000 (debatable) grant towards moving costs and expenses.

There are also constant complaints that older people stay in their homes long after they 'should' based on significant care needs, decreasing mobility and long term repair issues.

The incentive could encourage people moving to smaller houses, flats, retirement communities or even combining households with family members.

This would hopefully:

1. Free up larger properties for families/younger people wanting to upsize
2. Hopefully mean older people have less heating and energy expenses
3. Encourage older people to move into properties more suitable to reduced mobility & care needs longer term
4. Mean older properties are restored/better maintained

I appreciate there are loads of people who want to stay in their family home until the end, and this wouldn't change that view point, but maybe a social movement towards older people reducing the size of their homes would create a bit of social contagion where it's more openly discussed?

Also, house builders could be encouraged to build more bungalows/smaller homes specifically for this scheme which perhaps are built with stair lifts in mind etc.

YABU - this will never work, ridiculous suggestion

YANBU - this has legs, you should go into politics

Seven year rule applies only if you’re paying full market rent. If you’re still living in the property you’ve signed over, and not paying rent, or paying reduced rent, then you’ve reserved the benefit to yourself - it’s a Gift with Reservation of Benefit, or GRoB. On your death, it will be taxed as if it were still part of your estate.

And that’s on top of the Capital Gains Tax you paid when you “disposed” of it by signing it over.

The problem is the government take a big chunk of the difference. Then there's moving costs. I know someone went from a large 3 bed (doubles)with double garage to a small 2 bed (no garage, same street). By the time they'd paid for solicitors, moving costs and a new sofa and some curtains they only had s few thousand left.

But older homeowners tend to have made the most profit on their house so it doesn't make sense.

As for signing your house over to your children, I know one family who put the house into a trust. The parents and children were equal trustees and the house could not be sold to pay for care home fees. Don’t you mean beneficiaries?

The house may not be able to be sold, but LAs are wise to this dodge and likely to regard it as “deprivation of assets”. They will then assess you as if you still owned the house. It’s up to you where you get the money to pay for care from, but if they’ve concluded you deliberately got rid of £500k worth of house, they will assess you as if you still have that money available and you’ll be paying your own care fees.

But the profit is on paper only. Theoretically I've made a couple of hundred thousand on this property that I bought more than 30 years ago. But I have to live somewhere, and as I've already said, somewhere smaller (but that can still accommodate my adult children and GCs when they come to stay) will not release any of my 'profit' after the expenses involved. It would only be useful profit if I lived on the street (or possibly if I moved 100 miles north to where it's cheaper, but I'd have no support system)

I agree, there is enough housing to go round, the problem is more that those who can tend to buy up more than they personally need because it is profitable to do so.
It's understandable, they are acting in thier economic best interests but in doing so they make life worse for they rest of us.
It is the job of govt to legislate for the good of society as a whole, they are the ones ultimately to blame for our dysfunctional housing market.

One moment they were late 60’s early 70’s in fine health enjoying retirement then they started to gradually decline physically and mentally where the thought of moving just became too much bother. But then if they move late 60s, early 70s, they will have to give up a lot of their life, for example gardening, having friends to stay, any hobbies which take up a lot of space, playing a musical instrument.

If you’ve downsized to a 1 bed flat, any chance of a live in carer has gone, you’ll be straight into a care home

👏👏👏👏👏

Ive seen this suggested many times.

The fact is, people who actually want to downsize, usually do it anyway. If they don’t want to, they don’t, and for many people in ordinary 3 or 4 bed family homes - I’m not talking 5 bed Georgian rectories with room for a pony - the house is often not too big or unmanageable and there often isn’t anything suitable that would cost not a lot less, so there’s not enough benefit to make all the hassle worth it. And TBH £2k would be neither here nor there - even many years ago my DM used to say it cost £10k to move - all the fees and stamp duty, removals, never mind the need for new carpets etc.

The other factor is that the older people get, the less they feel like all the hassle and upheaval - moving is a major PITA even when you’re young and fit. Once people really are getting old and decrepit, it’d usually need someone else to arrange it all - estate agents, solicitors, removals - not to mention deciding what to get rid of - all a huge ask, even if there’s family nearby, which is often not the case.

@saraclara most people who downsize are buying a cheaper smaller house; so I can't see how most don't have enough equity to pay stamp duty.
There should be far more help for the young imo as this would benefit everyone. We don't even have the workers to staff the NHS because they are going elsewhere for opportunity & with an ageing population the current system is not financially viable.

We downsized from a 4 bedroom/2 bath house to a 2 bedroom detached bungalow 16 years ago. Our DS got married and the place was too big for us, we were In our mid 50's when we moved. The key is to move while you are relatively young enough to deal with the hassle, and in our case

the system is working exactly as it was always intended to work: as a mechamism to funnel your labours into their pockets
I agree, although I would argue that those in power will always seek to channel the fruits of our labour into their pockets, that's just how most humans behave when they get power.

But it will be released eventually. Why waste tax payers money for your profit?

(Posted too soon!) And in our case a major refurb

Probably because they've got their home, their community and their friends and in some cases their family where they are and they like where they live.

which makes sense but you do get older people living in completely unsuitable housing which then just doesn't work for them.

I'm not saying that they don't have enough to pay the stamp duty. But my calculations when I looked at the difference between my house and the next door neighbour's significanty smaller one, was that after I'd paid it (and all the other buying and selling expenses) I would have virtually nothing to show for it but a much less nice house and maybe a couple of thousand pounds.

That's what I mean about their being little incentive to downsize. A whole lot of stress, and I'd end up with a couple of thousand pounds of released equity.
Seriously, would you bother?

I guess it's very area dependent as that wouldn't be true for my part of London. I could downsize & have hundreds of thousands & I don't have a big house & Im not particularly old.

what I also noticed during covid & when my own older relatives had health issues proximity to family is important. Obviously not everyone has family or gets on with them but I had a fair few neighbours who were really struggling & their dc were miles & miles away due to being priced out.

I'll admit that I was surprised at how little more my house was worth then the three bed. Maybe there's just more demand for the three beds?

And of course, in significantly cheaper areas, there's almost always little incentive to downsize. If all houses are relatively cheap, there's never going to be that much difference in price to cover all the costs and still release equity.

of course those younger people who inherit will be able to afford 5 bed houses anyway. Personally (and i say this as someone who will pass on wealth to my kids) i think its wrong that going forwards property ownership will depend on inheritance far more than how hard/what sort of job someone has.

@saraclara I did read that 3 beds will hold their value as downsizers & families will be fighting for them.

agree, wanting to stay in your own home is totally understandable....the problem is it MAY leave you up the creek without a paddle

most people who downsize are buying a cheaper smaller house; so I can't see how most don't have enough equity to pay stamp duty.

Then you are ignoring what many people have already said. It’s not just stamp duty, it’s removal costs, solicitors fees, redecorating the new place and all the work and stress that goes along with it. People downsizing might end up with enough money to pay all the expenses that it incurs, but they have no incentive to do that if they don’t need to move. It’s not worth the stress just to end up in a smaller property with no significant benefit to anyone other than the taxman, the solicitors, and the strangers that buy your home.

The point of the OP was about encouraging homeowners that have houses bigger than they need to move for the benefit of people who want to buy them. It’s not about helping them with moving costs just for the sake of being nice to them.

That actually makes sense as an explanation.

So in some ways, me trying to downsize doesn't help young families, either. And if I moved to a tiny place, then I could be accused of preventing a young person from getting on the housing ladder!

The only thing that would help anyone is me moving to a retirement flat, and I wouldn't wish that on my kids when I die. Those things are toxic. And to be fair I'd hate to live among (solely) old people.

But it will be released eventually. Why waste tax payers money for your profit?

Why would you prioritise tax payers over your profit. I mean no one would do that.