No matter what your age, it is hard to avoid being bombarded by the glowing advertising of retirement villages, mostly featuring attractive Pakeha frolicking in the fabulous facilities.
It is not surprising. This is a big and booming business.
At the end of 2019, 34,200 villas, apartments and serviced apartments were housing about 44,500 people and it is estimated that across the country nearly 14% of those aged 75 or over are living in a retirement village. Seven years ago, this percentage was nine.
The growth is such that in seven years’ time the sector is expected to need another 18,000 units.
While many residents (and their families) relish the release from worrying about home maintenance, the security of the villages and the facilities they can access, concerns have been raised about some aspects of the contracts made when residents make the move to a village.
Indeed, in December, the Commission for Financial Capability’s Retirement Commissioner Jane Wrightson, while acknowledging the majority of residents appear content and that most operators provide ‘‘very good’’ services and care, there were ‘‘issues at the margins’’ needing attention. The CCFC released a discussion paper on the legislation governing villages, recommending it was time for a policy review.
This seems sensible, considering the recent growth spurt in the industry and the facts that the Retirement Villages Act came into being in 2003, followed by the Retirement Villages Code of Practice in 2008.
One of the issues, highlighted by Consumer NZ in its perusal of the sector involving six major players, is that of capital gains.
Residents sign contracts which give them rights to live in their units but no ownership rights. The capital gain when the unit is sold after the resident dies or leaves is retained by the retirement village operator.
This is not always the case in Australia, so it is possible to have a system whereby capital gains are shared.
Another bone of contention is those contracts in which residents must pay for repairing appliances and other things in their units even though they do not own them.
Among the other issues the CFFC discussion paper addresses are the lack of a clear dispute resolution process, the need for contracts in plain language, the contractual issues which can arise when transitioning from a unit to a healthcare setting and the imposition of weekly fees in the time between a resident vacating a unit and the reoccupation of that unit.
The CFFC paper also draws attention to the likelihood the existing model will need to change as future generations of owner-occupiers are likely to still have mortgages on their homes when they reach 65 with less equity to invest in a unit.
It seems increasingly likely some form of rental model will be required, some operators suggesting this could be needed as soon as in the next five to 10 years.
The CFFC points out there would not be the same level of security under such a model — renters could find rents unaffordable over time and rent rises might force them out.
If a village had high numbers of renters, there might be limited funds available to maintain the overall village standard, the CFFC said.
It recommended the policy review should include analysis of future trends, consider if consumer protections are strong enough to adapt to change and investigate whether different models should be encouraged.
The call for a review has been welcomed by consumer groups who see the need for much better protection for residents’ rights, but village operators have been less enthusiastic, saying some minor changes may be needed, but rejecting the need for a major reform.
It is too soon to say whose wishes will hold the most sway. Submissions on the discussion paper closed at the end of February and, after reviewing these, the CFFC will brief relevant ministers on what it considers should happen next.
