Industry body defends retirement villages
Tuesday, 27th June, 2017
AUSTRALIA'S peak body representing retirement villages, the Retirement Living Council, has come to the defence of the industry following the recent damning Fairfax/Four Corners investigation of major provider Aveo.
"More than 184,000 senior Australians call a retirement village home and despite what you'd believe from 4 Corners (sic) last night and the related coverage over the weekend, the overwhelming majority are happier than they were before they made the move," it said in a statement released this morning.
"We know this because we have the facts to prove it: the most comprehensive survey of more than 5000 of these residents in 2013 found more than 90 per cent reported their social life has improved or stayed the same, and 90 per cent believed the move had been a good financial decision.
"Of recent purchasers, 83 per cent regarded their fees as 'moderately reasonable' to 'very reasonable', and 70 per cent said their cost of living was the same or less than their previous family home.
"If they had their time over to make the same choice to move, 98 per cent said they would do it - an overwhelming majority who are not represented in these 4 Corners (sic) or Fairfax stories."
The statement said the research further showed:
- The average entry price into a retirement village remains under $400,000, which is on average 67 per cent of the median house price in the same postcode;
- Village residents on average live independently for five years longer than residents in the general community.
The Fairfax/Four Corners investigation said there was "a litany of questionable business practices at Aveo including churning of residents, fee gouging, safety issues and misleading marketing promises, such as safety and emergency services, made to some of the country's most vulnerable people".
The report said: "many retirees don't know what they are signing until it is too late".
"Driving this business model are three brutal engines: exit fees; ongoing management fees that continue even after you die or leave; and service fees for things such as food, the administering of tablets and, more lately, higher care services under Aveo's new Freedom Aged Care program," it said.
However, retirement living specialist Rachel Lane said senior Australians needed choice not protection.
The talk about 'protecting senior Australians' by 'abolishing deferred management fees' was likely to cause a lot more harm than good, she said.
"It's important to understand what the deferred management fee is before we start calling for it to be abolished.
"The deferred management fee is essentially the retirement village operator's profit. They are not allowed to profit from the ongoing service charges and they choose to keep their upfront prices low so that it is attractive to people to buy, so basically the deferred management fee is compensation for the low purchase price and running the village at cost.
"If the government moved to abolish the deferred management fee, thousands of people - including my grandmother, who moved to a retirement village almost seven years ago - would be unable to afford it. I would go as far as to say that prices could double overnight."
Ms Lane, principal of Aged Care Gurus, which provides financial and legal advice about aged care, retirement communities and home care, said the deferred management fee was a "vital ingredient in providing affordable housing".
"There are some villages that charge a deferred management fee of 100% - which some people find shocking - but percentages are not relevant.
"One hundred per cent of what. Compared with say 30% or 40% of what? One hundred per cent of $100,000 is cheaper than 30% or 40% of $450,000 .... and if someone only has $100,000 to spend then $450,000 is completely unaffordable.
"The problem is that people shouldn't be forced to buy under an affordable housing model.
"Senior Australians need choice, they don't need 'protection' from deferred management fees. Plenty of seniors can afford to pay the 'real price' of these retirement village units upfront - if the retirement villages would let them.
"A parliamentary inquiry into the seniors housing sector in Victoria ran for more than 12 months last year and as a result 15 recommendations were made to parliament including that retirement villages will need to give residents the choice of purchasing a unit with or without a deferred management fee.
"People who are downsizing from even modest homes in Melbourne and Sydney are often netting more than $1 million. They don't need affordable housing.
"In fact, when you add to the deferred management fee the loss in pension that results from these artificially low prices I would argue that it's not affordable housing, it's just cheap.