Illustrations by Vincent Kilbride
No one likes to think about becoming older and less independent. But, as the populations of many developed countries skew to an older average age, it is something that everyone has to consider.
As people live longer, their health and social needs take centre stage. The default options for care are purpose-built facilities or living closer to relatives. Maybe even living with relatives, usually their adult children who are sometimes approaching old age themselves.
In the UK and many European countries, purpose-built facilities can feel a little institutional. ‘Care homes’, as they are called, specialise in looking after elderly people who are no longer confident about or able to look after themselves independently. The residents generally live communally: each person has their own bedroom and bathroom but all meals are served together and there are communal living rooms.
The elderly often feel they have lost agency in these environments and the facilities themselves have a reputation for not stimulating their residents – usually a far cry from the palatial settings of the Thursday Murder Club Netflix adaptation.
The cost is also prohibitive: according to Age UK, a charity that advocates for the elderly, the average cost for a “self-funder” – a resident with more than £23,500 ($31,500) of assets who will not receive state help – is £949 per week ($1,273), rising to £1,267 ($1,700) in the cases of those requiring more intensive care such as people with advanced dementia or mobility issues. It is little wonder then that many older people are resistant to moving to a care home.
“There is a big gap for retirement homes in Europe,” says Gary Touyz FRICS, vice president with CBRE's Seniors Housing & Healthcare Group. “There’s a huge leap in going from the family home to a care home. It’s often a need decision rather than a lifestyle decision.”
But frequently, the alternative for the elderly of staying in their homes where they might be alone and living without any support at all, seems risky. Properties with so-called ‘granny annexes’ – typically, a bedroom, bathroom and living room which are accessible from the main home – are increasingly sought after as a compromise. The problem? There are so few homes that have them.
The term ‘granny annexe/flat’ is also a conundrum to be solved. It seems old-fashioned and inaccurate for modern purposes but is an instantly recognisable shorthand for a secondary dwelling or self-contained garden apartment.
“We’re seeing a significant growth in demand for the conversion of a building to include an annexe,” says Julia Meadowcroft, a partner at Knight Frank. “Buyers want flexible spaces with different levels of integration [but] it is unusual to find that ground floor space which is easily adaptable.”
“There’s a huge leap in going from the family home to a care home” Gary Touyz FRICS, CBRE
Regulatory change
In parts of the US, including Chicago, there are proposals to allow the construction of small separate, living accommodation in the gardens of existing homes. In July, John Cummins, Ireland’s Minister of State for Planning announced plans to allow units of up to 45m2 to be built in addition to an existing house. “I have been clear that this is not a solution to the housing challenges we face but it does provide an option for people who want to live independently of their family home,” he said.
Elsewhere, the allowances are even more generous. New Zealand has recently suggested that granny flats can be built up to a size of 70m2 without requiring planning permission. In parts of Australia, the size permitted will be up to 80m2. A report in 2023 calculated that 655,000 homes in Sydney, Melbourne and Brisbane could accommodate a granny annexe.
“For policymakers and government, granny flats present an immediate and cost-effective opportunity to deliver much-needed housing supply within existing town planning guidelines,” said Tim Lawless, one of the report’s authors.
The picture in the UK is less straightforward, however. Although the building of small units to accommodate additional family members (whether elderly or otherwise) is encouraged, there are factors that make it more difficult. The first is the UK’s housing stock, which is among the oldest in Europe – almost 40% of it was built before the Second World War – and size: at an average of about 90m2, it is among the smallest in Europe.
Council tax is another thorny issue. The tax, levied by the local authority on properties according to their size, can increase dramatically depending on how the granny flat is categorised. In the optimum scenario, the resident could qualify for no council tax at all. In the worst case, the granny flat could be seen as an additional property and subject to a 100% surcharge (up to 300% in Wales).
Likewise, the British tax authority, HMRC, has been showing an increased interest in collecting stamp duty – the sales tax payable – on homes with granny annexes. Previously exempt, the ‘multi-dwellings relief’ was abolished in 2024, meaning that anyone buying a home which includes a granny annexe might find themselves paying stamp duty running to additional tens of thousands of pounds.
If someone is selling a property with a granny annexe, even if it is part of their principal home – and most granny annexes come with the condition that they cannot be sold as a stand-alone unit – then, potentially, it could be taxable. There is a risk that HMRC could regard it as subject to capital gains tax, if it has ever been rented or used as a holiday let.
Nevertheless, multi-generational living, as modelled among families in south and east Asia and many African and Mediterranean societies, is gaining in popularity. This may be in no small part to the families not wanting to use their elderly relatives’ savings and housing equity spent on care home fees. But moving elderly people out of – typically – the large family homes in which they live, to smaller, more supported accommodation has many benefits, not only for the elderly. Releasing the often larger family homes in which the elderly have been living onto the market keeps the housing market more fluid.
“The cost of living and the cost of buying a property has certainly made these arrangements more popular” Julia Meadowcroft, Knight Frank
Granny annexes for the young
Meadowcroft observes that granny annexes are increasingly not the preserve of the elderly but are used to accommodate the boomerang generation – young people who return home after university or a short period of independent living and are unable to afford local rents. “The cost of living and the cost of buying a property has certainly made these arrangements more popular, she says.
Touyz, who is based in Canada, believes there is a third way of accommodating the elderly. In North America and Australia he has seen the rise of rented accommodation specifically for the elderly. “They have a more established rental market whereas in the UK, there’s still an obsession with being a homeowner.
The [retiree] may only need the accommodation for eight or 10 years so it doesn’t make financial sense to build an annexe.” He warns that it is an issue that needs addressing, however. “The baby boomers are coming to an age when they need age-appropriate housing.”
No one is getting any younger and we all require housing that suits our needs. Maybe the granny annexe needs a name re-brand for those of us that are sensitive about age. The garden lodge or private guest suite, perhaps?
