The state government must ensure certainty for the retirement villages sector.
AS the first of the baby boomers step back from being grey nomads, the Western Australian government is contemplating their growing frailty.
How can it ensure boomers can live as safely and as independently as possible … and without undue pressure on the public health system and housing markets?
‘Ageing in place’ is obviously the objective but the family home is not always the right place to age if it limits mobility, social interaction and accelerates the ageing process.
Retirement villages are the gift that keeps giving for this.
Their safe, supportive and ‘walkable’ environments include aged-focused services and the benefits of informal supports and social connection.
They increase physical and mental health and wellbeing, in turn reducing emergency hospital admissions and enabling early discharge from hospital.
Family homes can be sold, creating more supply in the residential market and helping families to stay close together and comfortable in the knowledge mum or dad will be ok.
What’s more, retirement village business models mean they reduce pressure on social and affordable housing stock because they can offer accommodation at a significant discount.
The 2021 PWC/Property Council Retirement Census reports that in Perth the average incoming premium for a two-bedroom retirement village unit is 57 per cent of the median house price in the same postcode.
As one of the proponents behind the census, Tony Massaro, a partner at PWC’s Integrated Infrastructure Real Estate Advisory team, puts it:
“Retirement villages are a great weapon in the state’s housing arsenal when it comes to providing for our older people.”
And the total cost to the state for this ‘weapon’? “Nothing,” says Sandra Brewer, executive director at the Property Council of WA.
“In fact, the Property Council estimates these benefits equate to $2 billion annually to the country.
“We’ve got a sector that offers incredible social and economic benefits, why would we risk disrupting that?
“Particularly, when the cost of getting it wrong is so high.”
Surely, a gift we should be warmly embracing, then? Not in recent times and, frankly, we’re now seeing the impact.
According to the census, more than 10,500 retirement village units will come on to the market nationally over the next three financial years, but only 100 are in WA.
There are some limitations in the sample size and mix for this statistic, however, my experience is that the pipeline in WA has dried up dramatically over the past three years.
One reason is the uncertainty created by the reform process, led in WA by the Department of Mines, Industry Regulation and Safety (DMIRS), which is also responsible for consumer protection.
These developments are not cheap, and no organisation is going to invest in a long-term prospect like a retirement village without certainty as to the underlying regulatory framework.
A further issue is that the DMIRS proposal that operators be required to purchase a departing resident’s unit where it has not sold on the open market is a mandatory buy-back.
This means the operator carries this significant cost until the unit is sold.
Alarmingly, a recent survey of retirement village operators has shown that less than one in five would have dedicated liquidity to fund these payments.
Similar changes on the east coast have seen some operators go out of business.
Modelling also suggests operators would need to increase unit prices for incoming residents to cover the finance costs of mandatory buy-backs.
The obvious consequence is fewer WA seniors can afford retirement village life. While there are buy-back models that might be sustainable, and which have been put to DMIRS, there has been limited indication they are being considered.
Deputy Premier Roger Cook is also responsible for the commerce portfolio and we know he understands the impact of inappropriate policy settings on the public health system and social and affordable housing.
Mr Cook has a choice: accept the ‘gift’ by getting the policy settings right for long-term investment and, in turn, reduce public health and social housing burdens, or let it stagnate. As Ms Brewer says:
“Businesses have choices about where they operate and those choices are informed by market settings.”
I know which choice I would be making.
The author acknowledges the contribution of Andreas Geronimos to this article.
• Amber Crosthwaite is a commercial lawyer specialising in seniors living, aged care and disability
