Retirement villages sector supports some legislative change but warns of negative unintended consequences
21 November 2023
New Zealand’s retirement village sector supports some changes to industry regulation but believes some proposals will have negative unintended consequences, stifle innovation and reduce the choices available to more than 50,000 residents living in villages.
The Retirement Villages Association (RVA), which represents 96 per cent of the country’s retirement villages by unit number, has lodged its submission on the Ministry of Housing and Urban Development (MHUD) Options for Change discussion paper.
RVA executive director John Collyns says the MHUD discussion paper includes most of the substantial reforms the sector is already voluntarily rolling out in retirement villages across the country.
However, some of the proposals, including a mandatory repayment deadline to return a resident’s capital sum, will impact the financial viability of many operators, including smaller regional retirement villages and slow the development of much-needed new villages, many with hospital-level aged care.
“It is vital the integrity of the retirement villages model in New Zealand is preserved because it works. Approximately 100 older Kiwis choose to move into a village every week and independent research shows exceptional levels of satisfaction with village living.
“One of the great benefits of the current legislation is that it enables flexibility and competition between operators, so that they can develop business models that meet current and future residents’ needs – it would be a backwards step to undermine this.
“The sector’s funders have told us that a mandatory buyback regime could reduce or eliminate bank appetite to fund the sector.
"A mandatory requirement to pay residents out within any specific time frame would reduce consumer choice, increase costs for residents, slow down new village development, and result in insolvency for some smaller village operators in regional New Zealand.”&
Research shows that around 75 per cent of units are relicensed within six months, and fewer than 10% take more than nine months, says Mr Collyns.
“Given the need for new residents to sign applications to move to a village, then place their house on the market, achieve a sale and then secure settlement, it is always going to take some time.
“Rather than penalising the efficient as well as the tardy by imposing a statutory deadline for refunding the outgoing residents’ capital, we support MHUD’s proposal that operators pay interest on the outstanding amount. We support this obligation starting after nine months.”
The RVA is also concerned about proposals to introduce a standardised occupation right agreement (ORA), the contract between a resident and a village, or new legislative powers to declare ORA terms to be unfair.
“The MHUD’s paper presumes there’s a standard Licence to Occupy business model across the sector, but there can’t be a one-size-fits-all ORA,” says Mr Collyns.
“Different operators have different terms. We believe this would not work for unit title and capital gain sharing villages, and other ‘non-standard’ ORAs and would ultimately stifle innovation.”
Another issue is MHUD’s suggestion that existing consumer protection in the Fair Trading Act should be duplicated in the Retirement Villages Act.
“ORAs are covered by existing process under the Fair Trading Act and the Registrar of Retirement Villages already has sufficient powers to act regarding misleading or deceptive advertisements.”
The RVA also wants the current dispute resolution system to be retained, however is open to some improvements. It has offered to fund a research role in the Retirement Commissioner’s office to gather quantitative evidence around how the system is working.
“Our view is that the system, by and large, performs well, offers residents and their families easy access to the system, and in most cases is reasonably timely,” says Mr Collyns.
“We support a change so that the Commissioner is responsible for appointing dispute panel members and statutory supervisors continuing to participate in the dispute resolution process.”
The RVA supports ending charging weekly fees and accruing of deferred management fees on vacated properties – on the basis that mandatory payments are not introduced and any such changes are not retrospective, as operators will need to adjust their business model for new terms.
Meanwhile, the RVA welcomes plans for a plain language Code of Practice, shorter disclosure statements, a list of operator-owned chattels for new residents and not passing on insurance excess charges unless the resident is at fault for loss, damage, or destruction.
RVA president Graham Wilkinson says village living is a popular choice for older New Zealanders and there is very high demand for homes in existing and new villages.
“The sector has a range of operators, both large and small, and with varying models and offerings that provide flexibility and choice for Kiwis. All villages know that without happy residents, there’s no business, so we work extremely hard to meet our residents’ expectations.
“The sector is also one of the country’s largest house builders, offering older New Zealanders a range of affordable accommodation options with independent living through to a continuum of care and expansive community facilities.”
The vast majority of retirement villages have already implemented substantial changes to the way they operate and other villages are following, he says.
Recent focus group research showed residents were overwhelmingly happy with their experiences of retirement living with many praising the companionship, social connections, safety, and security.
“Almost all residents said that their experience of moving into their village had gone well. They were confident that there was a complaints process for them to follow and they were relaxed that, if needed, they would be listened to.
“When residents were prompted about the moving out process, given the rigorous process they went through to sign up to the village, residents were mostly confident that the steps would play out as expected.
“We agree with calls to improve fairness for residents with respect to stopping all fees, ensuring sufficient time for families to clear properties after a resident has moved out and similar improvements.
“However, the call for retrospective changes to agreements, a mandatory timeframe for repayment and other radical suggestions are neither fair nor desired.”