Right-sizing, residential care and retirement villagesPosted to Retirement Section on 17-03-2017
By Diane Maxwell - Retirement Commissioner
There are many challenges facing New Zealand as our population ages, among them the growing number of people reaching retirement who are renting, as well as the increasing need for aged residential care later in life. Both will have a longer-term impact on retirement villages.
Most people who choose to live in a retirement village currently fund the move by selling their family home. But home ownership rates are at their lowest level in almost 60 years, and by 2030 around 200,000 people aged over 65 will not own the place where they live. This will create a demand for rental options that are suitable for older people, offering an opportunity to operators who anticipate these future needs and can adapt quickly.
As our population ages, there will also be some stress on the country’s financial resources and significantly more stress on the housing stock. The idea of downsizing, or what we prefer to call ‘right-sizing’, including by moving to a retirement village, can be a convenient solution for asset-rich but income-poor retirees.
However, right-sizing requires another buyer to want to, or be able to, up-size. Given the sheer number of older people who could be looking to do this at around the same time, the potential for realising cash from home assets may not be as great as anticipated and village operators may need to consider offering a wider range of occupancy options than they do currently.
The Ministry of Social Development has highlighted the rising demand for aged residential care as baby boomers reach 85. Between 2025 and 2030 the number of people needing some form of residential care is expected to grow by more than 20%, or over 2000 people, a year, reaching up to 58,000 beds by 2030 (MSD: ‘Homeless Baby Boomers’).
Catering for this demand will require the creation of an additional 100-bed facility every two and half weeks for those five years. Retirement village operators currently supply around 6% of the residential care beds through an occupation right agreement model and this approach to aged care is expected to grow.
The Commission has worked hard over the past year to help retirees of the future, and today, understand these issues and make better decisions about retirement village living. We have listened to retirees’ strong concerns, such as access to care in a retirement village, or the fairness of a village resident’s exposure to capital loss if the property market depreciated.
Our ‘Thinking of living in a retirement village?’ seminar series has continued to grow and reach new parts of the country. We have produced an improved version of our guide ‘Thinking of living in a retirement village?’ and are currently revising our online resources. We have organised a series of forums and workshops for residents, hosted an industry stakeholders’ forum and attended conferences and forums organised by the operators, the Retirement Villages Association and Aged Care.
This work has enabled us to keep abreast of issues and trends that are emerging in the industry and build relationships with all involved, so that we can be satisfied the retirement village regime is protecting the interests of residents and intending residents.
We conduct regular monitoring activities covering a specific issue each time. The last one focused on the disputes process and led to recommendations to change the Retirement Villages Code of Practice. The next one will investigate the effectiveness of legal advice for residents.
The volume of disclosure information can overwhelm some intending residents. The Commission encouraged the Retirement Villages Association to produce a summary of key terms about the main financial considerations for intending residents. That document is being used by most RVA members in a trial through to next year; we hope it will then become part of the documentation that all RVA members are required to give intending residents.
Next: What happens to retirement villages when the property market changes?