* support a better service of advice and guidance and come together to create a company to offer equity release loans.
Many older home owners could improve their quality of life with extra care at home and better maintenance of their property, if they were to draw on the value of their home to pay for it. But research for the Joseph Rowntree Foundation concludes that this kind of self-help faces significant obstacles. The process is too daunting for many and those on means-tested benefits could end up little or no better off if they release equity tied up in their home.
The authors of the JRF report, Rachel Terry and Richard Gibson, conclude that the rules on benefits need to change to a simpler system which could help older people to raise the money they need to stay longer in their own home. The report also recommends local authorities support a better service of advice and guidance and come together to create a company to offer equity release loans.
The researchers propose that older people should be able to draw up to£3,000 a year from the value of their home for homecare or home repairs, without it affecting their benefits. This figure would match the concession for better-off people to make gifts without affecting their liability to inheritance tax.
Such a change would add little to the cost of benefits. The rules of the Financial Services Authority (FSA) require that people be advised against equity release if it would lead to a big loss of benefits. This is a major deterrent for older home owners on benefit who are likely to 'do without' rather than release housing equity and lose benefit.
In relation to guidance and support, the authors recommend an improved service that combines help with the practicalities and the financial arrangements. Some people could afford to pay for this service but a lot of the cost would probably have to be met by local authorities (perhaps using local voluntary agencies working with older people and Home Improvement Agencies).
The report also recommends that local authorities get together to create a company that could offer equity release loans for older people whom the commercial providers are not helping. It concludes that it would be possible to get private finance to fund such loans.
Rachel Terry and Richard Gibson said:
'Older home owners have a valuable asset. If they want to draw on it to improve their quality of life, it should be easier than it is. Many will want the advice of someone they trust - perhaps from the council or from a voluntary body. And if they are on benefit, the current system could be radically simplified and improved to enable them to draw a little each year to buy the small extras that make so much difference tostaying in their own home.'
The full report, Obstacles to equity release by Rachel Terry and Richard Gibson, is published by the Joseph Rowntree Foundation and available from York Publishing Services Ltd (01904 430033) price£14.95. The report and summary of findings are available here.
The Joseph Rowntree Foundation is one of the largest social policy research and development charities in the UK. It supports a research and development programme that seeks to understand the causes of social difficulties and explore ways of overcoming them.
There are over two million older home owners who have housing equity in excess of£50,000, but incomes sufficiently low to qualify for benefits. If the threshold for housing equity were£100,000, there would be 1 million older home owners. (Source: Housing-rich, Income-poor: the Potential for Housing Wealth in Old Age by Sonia Sodha, published by the Institute for Public Policy Research in October 2005.)