RETIREMENT VILLAGES IN AUSTRALIA: THE CASE FOR COMMONWEALTH INTERVENTION.

• Date: 01 January 2018
• Author: Smeed, Brittany

1. INTRODUCTION

   When ABC aired their Four Corners expose, Bleed Them Dry Until They Die (1), viewers around Australia were shocked to learn about the exploitation of vulnerable elderly people by the retirement village industry. (2) The public outcry and media attention surrounding these issues quickly led to calls for reform and regulatory action across Australia. While some state and territory governments have demonstrated a commitment to addressing the issues raised by the media, we need to reconsider the capacity of state and territory governments to adequately respond to a problem that clearly exists on a national scale. This article will discuss the retirement village industry in Australia, consider the shortcomings of state and territory level regulation, and suggest that further reform needs to be implemented at a federal level to account for the changing nature of the industry in the context of our ageing population. It is argued that the federal government would be capable of regulating retirement villages as financial products, with the Australian Securities and Investments Commission ('ASIC') and the Australian Competition and Consumer Commission ('ACCC') playing a stronger role in monitoring consumer protection. However this requires a significant shift in the way that retirement villages are viewed from a legal perspective.

2. A NEW APPROACH

   In considering current issues with retirement village living, it is useful to understand that the way we define complex issues as social problems 'depends to a large extent on the perspectives of those in power'. (3) For this reason, when considering how policy can be developed to address the problems that have been identified, we first need to consider how the definition of retirement living has been shaped by those in power--namely, the retirement village industry itself.

   Here it is relevant to consider the fact that retirement housing was initially developed by charitable organisations in an attempt to cater for the needs of the elderly. While the industry has grown and changed significantly in nature, to the point where for-profit businesses are now major players, those businesses continue to rely on the old narrative that they are, first and foremost, providing a necessary housing service for the elderly. Industry lobbyists insist that retirement villages make up an important part of our housing landscape in Australia, offering an ideal 'lifestyle' and accommodation option for seniors to 'downsize' from their existing homes and free up the housing market for the younger generation. (4) Likewise, the commonly held view amongst consumers is that living in a retirement village is not a financial investment, but rather an 'investment in a lifestyle'. (5) As founder of the 'Find My Retirement Home' service has stated '[y]ou certainly don't buy into a retirement village to make money ... It's a lifestyle choice'. (6)

   As part of this discourse, village operators have traditionally tried to distance themselves from providers of aged care services. Instead, retirement villages have been framed as a housing choice (as distinct from provision of aged care in nursing homes and associated institutionalisation). (7) However this aspect of the industry is changing, with the ageing baby boomer population driving an increased interest in housing options that cater for 'ageing in place'. (8) For example, recent advertisements for Aveo's 'Freedom Aged Care' seek to distinguish themselves as '[a] genuine alternative to traditional aged care' and 'a community rather than a care institution or nursing home', using language such as 'living independently', 'in control', 'choice, independence and freedom' to emphasise the idea that they are still selling a housing and lifestyle choice. (9) Despite this evolving aspect of the industry, the traditional distinction between retirement village and aged care living is maintained by the segregation of regulation, legislation and policy for each type of living option. Retirement villages continue to be treated by the state and territory legislation as a housing product, whereas the Commonwealth government's aged care legislation is based on the conception of aged care as a necessary accommodation and care service which needs to remain financially viable. The issue with these two disparate approaches is that the various pieces of legislation do not operate consistently, and can complicate the transitions from retirement village living to aged care.

   Moreover, the views regarding the nature of retirement living do not accurately reflect the way retirement villages operate in Australia today. Rather, they mirror the industry's lobbying and marketing techniques, which rely on outdated narratives to present retirement villages as a housing and lifestyle choice, and also an important solution to the problems posed by our ageing population. (10) By deconstructing this approach, we can consider retirement villages in a different light, and develop policy responses that adequately address the issues with retirement living in contemporary Australia. The reality is that purchasing a right to reside in a retirement village is a transaction that has materially increased in financial complexity and cost over the years, with financial factors identified as a key influence amongst retirees contemplating the move into a village. (11) It is argued that, above all else, the decision to move to a retirement village needs to be understood as a significant and complex financial investment, and should be regulated at a national level (in alignment with existing consumer protection laws). (12)

3. DEVELOPMENT OF THE INDUSTRY: FROM CHARITY TO CORPORATE

   Retirement housing in Australia was born out of humble origins in the late 19th century, when the church and charitable sector intended to provide not-for-profit housing to the '"deserving" working aged of modest means.' (13) Presumably these organisations were motivated by religious or charitable principles when they started to develop a portfolio of retirement housing assets, and in the early 1950's there were nearly 200 not-for-profit organisations in Australia dedicated to providing housing for the elderly. (14)

   Industry growth was encouraged during the post-war period when the Aged Persons Homes Act 1954 (Cth) granted capital subsidies for the purpose of constructing homes for the aged. (15) This resulted in the construction of approximately 30,000 independent living units (which were largely for the financially disadvantaged), and firmly established the not-for-profit sector as leaders of the industry. (16) Financial arrangements between these organisations and residents varied, from standard rental agreements to the payment of an upfront capital donation something akin to today's ingoing contribution fee. (17) The capital subsidies offered under the Aged Persons Homes Act 1954 (Cth) were then phased out in 1974, and for-profit investment in the industry commenced shortly afterwards, resulting in the introduction of more complex financial arrangements that in some ways resemble the retirement village contracts that are still in use. (18)

   Further changes to the industry were brought about in 1981, when retirement villages were included as a 'prescribed interest' under the Companies Act 1981 (Cth) and accompanying codes, and regulated by the National Companies and Securities Commission ('NCSC'), which has since been replaced by ASIC. (19) However, the definition of 'prescribed interest' was amended in 1985 to specifically exclude retirement villages, with the justification being that buying-in to a retirement village is 'not an investment. Its purpose is to provide long-term accommodation on a freehold basis for retirees'. (20) Both the not-for-profit and private sector supported this amendment, as they viewed retirement villages as a local issue that could be suitably regulated by state and territory governments. (21) Accordingly, the NCSC delegated its authority to the states and territories, who were expected to pass their own legislation regulating retirement villages by mid-1987. (22) While this period of federal regulation was short-lived, it does provide some precedent for a return to a national approach with ASIC as the regulatory body. In addition, it should be noted that has now been over 30 years since the NCSC determined that retirement villages should be treated as a proprietary interest, and this view is no longer relevant when we consider the state of the industry today.

   For-profit investment continued to expand in the early 2000s, when a large number of property developers and investors acquired a number of existing villages and began to increase the private sector's share of the market. (23) However there was very little new built development during this period, which was further stalled by the 2008 global financial crisis ('GFC'). (24) This changed with the 2011 consolidation and national merger of the state-level Retirement Associations with the Property Council of Australia, which strengthened the industry's ability to advocate for targeted government policy. (25) For many this was viewed as the peak body that the larger operators needed to move away from their 'cottage industry' reputation and effectively present their interests to governments. (26)

   Today almost 60 percent of the retirement village market share is held by private investors, with large national organisations such as Aveo, Stockland and Lendlease holding approximately 7-9% each. (27) The other 40 percent remains with not-for-profit organisations, who have also become increasingly sophisticated in their investment in the industry. (28) This demonstrates a major change in the nature of retirement villages since the states and territories began legislating in this area, and raises questions about the ability of state and territory governments to manage an industry that now exists on a national scale.

4. THE CURRENT...