Research group Pestel warns on subsidies for elderly care

The Hanover-based market research institute Pestel has just published a new study highlighting a massive shortfall in the number of homes suitable for elderly people across Germany over the coming years, and is calling on the government to provide new funding to cover the widening gap.

According to Pestel, Germany will need to build or adapt 2.5m further homes accessible to old people over the coming year, which the researchers believe will cost nearly €40bn. They conclude that the government will need to provide additional funding of €540m annually over the next eight years – or €4.3bn by 2021 – to provide the right incentives for investors to convert enough existing homes to meet the demand. The alternative, they say, is a huge wave of old people with no alternative but to move into a much more expensive care home, whether they can afford to or not.

Researcher Matthias Günther of Pestel-Institut, who carried out the study on behalf of Verbändebündnis Wohnen65plus, (a lobbying group consisting of several influential industry associations and trade unions), said that elderly people in need of care are being increasingly forced to go into nursing homes if they don’t have the adaptation to their own homes as a minimum for their own care needs.

Talking to trade publication Immobilien Zeitung, Günther said the difference in annual costs between outside care and adaptation of the old person’s existing home was €7,200 a year, while the one-off adaptation costs to make an existing home elderly-friendly is an average of €15,600. The economic justification for making the necessary changes is clear, he says. Without funding for such improvements, he says, home care for the elderly will be €25bn higher in 2035 than they are now, and health insurance to pay for it all will have to rise by 50% above today’s levels.

The Pestel report makes the case for direct building subsidies and tax incentives in addition to the KfW loans at favourable rates available to house-owners for energy and other home improvements, to stave off what it sees as a pending housing crisis for the elderly. Loans alone won’t solve the problem, the researchers believe. “For most seventy year-olds, taking out a twenty-year loan isn’t a compelling option”, says Günther

Günther also believes that part of what the report is calling for in terms of financial assistance is also offering suitably-equipped smaller apartments at very modest rents to old people, a factor looming ever larger against the increasing poverty of many of Germany’s elderly. His research suggests that in 20 years time more than 25% of Germany’s elderly will be dependent on the state for basic subsistence, up from the mere 3% who are in that situation today.

While affordable housing is gearing up to be the single key issue of the coming national parliamentary elections in September, the Verbändebündnis lobby group says the issue of housing for the elderly is not receiving nearly enough attention, and certainly not the cost-saving measures critical now to avoid much heavier expenditure later. In a statement the association said, “The current government has effectively wiped its hands of the issue of adequate construction and adaptation of housing for the elderly, and the original pot of €100m in KfW subsidised funding has been whittled down to zero.”

Meanwhile, a study produced on the market for housing for the elderly by Patrizia Immobilien pinpoints good investment opportunities - particularly in German provincial regions, such as Mecklenburg-Vorpommern and Saxony in the east, and North Rhine-Westphalia in the west. Managed care homes in these states are already operating at close to full capacity, at more than 90%.. Karin Siebels, the author of the Patrizia study, says that, “In the individual urban and rural districts of these regions, the number of home residents will rise by between 2,000 and 20,000 by 2030.” In particular, she says, cities such as Cologne, Recklinghausen, Dortmund, Aachen, Esslingen, Ludwigsburg and Karlsruhe, extensive parts of Mecklenburg-Vorpommern in the north-east, as well as south-eastern Saxony, are all ripe for investments.

By contrast, regions such as southern Rhineland-Palatinate, northern Hesse and Lower Franconia are barely utilising 70% of existing nursing home capacity, the study shows, highlighting the strong regional differences.

Patrizia uses a proprietary scoring system for identifying investment opportunities. Key criteria are the level of utilisation, projected population growth and demand for easy access housing, all influenced by the number of over 80-year-olds. By 2030, their share of the total German population will almost double to 9%.

“There are wide variations from region to region as to how rapidly the population is aging,” said Siebels. In some areas of Thuringia and Saxony, every eighth resident will be over 80 in 2030, as opposed to a maximum of 6% of residents in the university cities. The larger cities will also see rising numbers of elderly people, especially in and around Hamburg, Hanover and Munich. “In Berlin, for example, the number of elderly in need of nursing home care will rise by more than 20,000 in the next 15 years,” she said.