How many people are forced to sell their homes to pay for care?
13th Feb 2013
"The real point here is that we have a scandal at the moment where, every year, 30-40,000 people are having to sell their houses to pay for care costs."
Jeremy Hunt, Secretary of State for Health, in an interview with the BBC, 10 February 2013
"I repeat no-one, again NO-ONE, can be forced to sell their home to pay for their care"
Paul Lewis, BBC Radio 4 presenter, on his blog, 16 July 2012
An Englishman's home is his castle, so the saying goes.
But, if our politicians and our media are to be believed, property owners are under threat, as councils "force" the elderly to sell their houses to pay for the care that they need in their old age.
Under the current system, anybody who needs to be cared for in a residential home and who has more than £23,250 in assets to their name is required to fund their own care. This means that many people end up selling their house in order to release a large sum of capital - a scenario that is often described as grossly unfair.
The Dilnot report into the future of social care funding produced a model that shows how people who need care risk seeing their assets depleted by up to 80%. (With a cap on care costs in place, an individual would find themselves less exposed financially.)
However, this graph doesn't tell us how many people will have an income or cash savings of hundreds of thousands of pounds or how many of them will need to sell their home to release the equity (although this will certainly be an eventuality faced by some of them).
How many people are selling their homes to pay for care?
The Government claims that 30,000 to 40,000 people are "forced" to sell their homes each year.
The Department of Health confirmed that the source of its numbers is a 2006 briefing paper produced by Melanie Henwood Associates, a consultancy firm, for the BBC's Panorama programme.
However, the authors of the briefing paper admit that the numbers are slippery.
They trace the likely origin of the 40,000 figure (the upper threshold of the Government's estimate) to research on housing equity and inheritance produced between 1995 and 1997, suggesting that it's an estimate made "on the basis of some very broad assumptions".
While they throw their weight behind the number, they also note how the statistics vary widely.
In response to Paul Burstow MP's claim that 70,000 people had been forced to sell their homes in 2001 alone, they point out that this is a number extrapolated from a survey of only 16% of care home residents, who are unlikely to be representative of the national picture.
Or halve it?
Aside from the consultancy's 2006 report, we find other statistics that might help us to understand why 30,000 is the lower threshold of its estimate.
In 2010, the Daily Telegraph claimed that 20,000 people had been forced to sell their homes in the course of a year. The article reported statistics obtained by Philip Davies MP from the House of Commons Library and the healthcare analysts Laing & Buisson.
The journalist Paul Lewis shows how we might arrive at this figure.
Laing & Buisson's annual survey of care homes shows that in 2009 (the date range of the Telegraph's article) there were 155,000 people paying for their own care (some 40% of the total).
Meanwhile, a 2001 Department of Health survey showed that some 30% of self-funders had sold their home before entering residential care. Applying this percentage to the total number of self-funders in 2009, we might be tempted to conclude that in 2009 approximately 48,000 individuals (30% of 155,000 self-funders) sold their homes to pay for care.
But that's not the end of the calculation. Paul Lewis explains why:
"...those 48,000 people entered their care home at various times in the past. So to get the number who had sold per year the total has to be divided by the average length of stay in a care home which is two and a half years. That reduces the number who sell per year to 19,200. Laing & Buisson has told me that analysis is correct."
According to Laing & Buisson's most recent figures, in 2011/12 175,000 people paid for their own care - an increase on 2009. If we repeat the calculation above, we arrive at a figure of 52,500 self-funders selling their home or 21,000 per year.
It should be emphasised that the average length of stay in a care home - a key component of this maths puzzle - is a crude approximation at best. The figure is likely to be skewed by a so-called "tail of long survivors" - those residents who suffer from dementia and who are likely to spend several years in a care home. Furthermore, it's highly possible that the 30% statistic, generated in 2001, ought to be revised upwards or downwards, although there's no definitive estimate to replace it.
Nevertheless the Government's claim that 30-40,000 people are required to sell their homes each year appears to be based on exploratory research that is almost 20 years out of date.
Are people "forced" into a sale?
If somebody enters a care home and another person - a spouse, for example - is still living at the family home, then the value of the house is usually disregarded in the means-test and the property is a protected asset.
Furthermore, some people who live alone have been able to keep the keys to their property via a "deferred payment" scheme. This allows someone who enters a residential home to retain ownership of their house, as the local authority pays their care home fees on the condition that it recovers the cost when the home is sold.
There has been debate about whether or not this is a legal requirement. Paul Lewis, the presenter of Radio 4's Money Box, has noted that in 2009 the Department of Health issued guidance to local councils, suggesting that they were under an obligation to offer this option:
"Health Ministers expect councils to offer deferred payment agreements in appropriate cases and draw deferred payments arrangements to the attention of prospective residents. Whilst councils have discretion to decide on a case by case basis, whether to enter into a deferred payments agreement, it is the Department's view that if a local authority were to have a policy of never exercising its discretionary powers to make deferrals, it is likely the courts would find this to be unlawful." [emphasis added]
As Andrew Dilnot observed in his report on the future of social care funding, the use of deferred payment schemes is "patchy" and not mandatory. He also made the important point that as local authorities are not able to charge interest on the loan to the homeowner, the scheme runs at a cost.
In 2012 the Government announced the creation of a Universal Deferred Payment Scheme, in apparent recognition of the fact that there had not been fair access to this offer.
After Jeremy Hunt's announcement on the planned reforms to the social care system, the Department of Health stated that from April 2015:
"No-one will have to sell their home in their lifetime to pay for residential care. If people cannot afford their fees without selling their home, they will have the right to defer paying during their lifetime."
From this point, local authorities will be able to charge interest on the loan.
Where there's a will, there's a way?
Or, as the Spectator put it, "where there's a will, there are relatives". Not everybody agrees with the idea that it is the state's responsibility to fund the long-term care of the elderly.
Many of the older generation, having saved money all their lives, hope to leave a legacy to their children and grandchildren - which, in most cases, is the keys to their house.
It's argued that the current system penalises the thrifty, while the state picks up the bill for those with no assets. But as a Daily Telegraph columnist opined, "it is a morally dubious policy for the taxpayer to underwrite the inheritances of the wealthy".
Whether or not this is a policy that is designed to protect middle-class home owners, it's important to be candid about the scale of the problem that inspired the reform. The Government's figures on the number of people "forced" to sell their homes to pay for care are not exactly robust.
Until we have higher quality data, any calculation will rely on some guesswork. The smaller estimates are not much more useful than the larger ones. Even so, it appears that the Coalition may have exaggerated the number of people who have been affected by the "scandal" and, so implicitly, the number of people the new system will help.