Pearls and Irritations

The looming question for me and my partner is “where might we live as we grow older and frailer?” For us, the ideal place is likely to be a retirement village. But at what cost?

These days, there are more than 2,000 retirement villages operating in Australia, housing approximately 200,000 older Australians, usually over the age of 55 who are no longer in the workforce. Residents are usually people who have grown tired of the responsibilities associated with managing a home or they may be feeling vulnerable or have other concerns which leads to them moving into a retirement village. Two thirds of residents are women and most residents are aged between 75 and 85.

Retirement villages are no longer just a unit or villa in a complex, with a parking space; they have morphed into “retirement lifestyle villages” where there are often swimming pools, gardens, gyms, theatres, grand pianos, croquet lawns, libraries, hairdressers, cafes, and a village bus for outings. Retirement villages are not yet the domain of wealthy Australians; they are in fact the homes of ordinary Australians. In the 1960s and 1970s, even blue-collar workers could afford to move into a retirement village (eg my tram-driver grandfather and my grandmother who did not work).

Retirement villages are no longer the initiatives of churches, charities, clubs or philanthropists, nowadays they are the domain of the property industry. Indeed, the peak body for retirement village investors and operators is the Retirement Living Council and they are represented by the Property Council of Australia in each state or territory.

For many people, moving into a retirement village will mean selling the family home. The cost of an Independent Living Unit will be the market rate in the area. In addition, operators charge a monthly or fortnightly service fee that covers things such as council rates, building insurance, repairs and maintenance, staff wages and the like. Residents will also be charged a Deferred Management Fee upon exit and may be charged an additional fee to refresh the ILU, irrespective of its condition when an ILU becomes vacant.

However, the ILU contracts give prerogatives to the investors and operators to create fees, and the majority of contracts do not give a share of the capital gain on the ILU when it is time for the resident to leave the village.

Whilst aged care is the domain of the Commonwealth, retirement villages are the responsibility of state or territory governments. The Royal Commission into Aged Care Quality and Safety produced a damning report of the aged care industry and the Federal Government has taken on the enormous task of implementing the recommendations, including hopefully, a new Aged Care Act. What was revealed during the Aged Care Royal Commission told us that economic rationalism (ie, let the market decide) doesn’t work.

Yet, almost all retirement villages are run along economic rationalist lines. These same investors and operators are moving into delivering Commonwealth-funded Home Care Packages package to the aged living in their homes. The Home Care Package industry is another unregulated field ripe for the economic rationalist model. Until recently, when new industrial relations rules were implemented, a friend living in a retirement village and in receipt of a Home Care Package told me he was being charged by the provider for the weekend penalties, whilst the staff delivering the service were not paid penalty rates.

Meanwhile, the retirement villages industry, state by state, continues on its merry way. Every state has different legislation, yet it is all the same as it favours investor operators over residents. Ever so often something happens, and a few bandaids are applied to the existing legislation or regulations; the residents are fed a few crumbs, while everyone is worn down by the filibuster and lobbying of the Property Council.

Here in Canberra, there are approx. 5,000 older people residing in the safe haven of a retirement village, where the rules, fees and charges are determined by the investors and operators, with minimal consultation with the residents. Most retirement villages plunder residents of their life savings through contracts, fees and charges, and a business model that favours the investors and operators.

The longer residents stay in a retirement village, the poorer they get. When they reach the point of graduating to residential aged care, they must pay a market rate for a room which will then be much more than their refund of capital from the retirement village.

My mother was lucky as she was able to afford the room she wanted. However, she had to stump up the difference between her ILU refund after 19 years, and the cost of her aged care accommodation; she should have been given a significant share of the capital gains when she downsized to aged care. At the same time, my mother’s friend, Pat, another long-term resident, was not so fortunate when it came to moving into aged care. Pat was offered a very small room; she asked if they had something larger to which came the reply, “this is all you can afford”. There are more and more people like Pat living in retirement villages.

In 2023, the ACT Retirement Villages Residents Association requested the Territory Government to establish an ombudsman to oversee various difficulties between residents and management. In a media release issued on 23 September, the Property Council joyously announced “The Retirement Living Council and Property Council have welcomed today’s announcement from the ACT Government to not pursue a Retirement Living Ombudsman”. 

In The Canberra Times (6 Aug 2024) Crispin Hull summarised the view of Rod Sims, former chair of the Australian Competition and Consumer Commission, concerning economic rationalism that, “the fundamental point is that corporations simply cannot be trusted to do the right thing. To the contrary, unless constrained by regulation, you can almost guarantee they will do the wrong thing to the detriment of competition, productivity and economic health in general”. 

Retirement villages are not an appropriate domain for harvesting profits. Retirement villages should be treated as a home, rather than an investment, and residents should be treated as residents, not commodities. Residents need to be treated with financial as well as social respect.

So to ameliorate the current situation and to redress the power imbalance with some semblance of “a level playing field”, retirement villages should be properly regulated in every state and territory with the emphasis on:

1. A strong Retirement Village Act to protect the interests of residents not just the investors and operators;
2. The appointment of a statutory registrar with powers to inspect and intervene in disputes between the residents and the operators over contracts, fees and charges etc; and
3. A comprehensive publicly accessible register containing full pro-forma copy of contracts, details of the village ownership and management, and a transparent schedule of all fees charged and policies to residents.

Alternatively, the ACT Government should be asked to conduct the equivalent of a Royal Commission into the management and operations of retirement villages in the ACT.

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