Retirement village operating models and regulations
BERL was commissioned by Te Ara Ahunga Ora — Retirement Commission (TAAO) to undertake a literature review that investigated the different operating models used by providers of retirement villages internationally. Our report incorporates a review of the operating models in six countries, including the regulatory and legislative context. As part of this review, we spoke with industry experts in Australia, the United States of America (USA), the United Kingdom (UK), and Canada. Also included in this report is a review of the retirement village operating models in Germany and India.
Under the Retirement Villages Act 2003, TAAO has a statutory obligation to monitor the effects of the retirement village legal framework. Therefore, in December 2020 TAAO proposed a review of retirement village legislation and released a white paper setting out issues around the retirement village framework. The need for a review was confirmed in June 2021 after public consultation on the white paper, during which 3,300 submissions were received. Subsequently, TAAO provided a summary and recommendations report to the government.
TAAO concluded that the Retirement Villages Act 2003 was at risk of becoming outdated and unfit for purpose. Key concerns were raised about the resale process, the weekly fees charged after a resident vacates a unit, flaws in an overly complicated complaints system, confusing documentation, and the tricky interface between the village and care facilities.
From our research and conversations with international retirement village contacts, it is evident that New Zealand has a long-established retirement village market, with a higher number of retirement villages per capita than anywhere else in the world. The concept of living in retirement communities is much more ingrained in New Zealand culture than in many other countries.
The license-to-occupy model, which is standard in New Zealand and accounts for 95 percent of our retirement villages, has many drawbacks regarding affordability and a lack of flexibility for the residents of retirement villages. Our research uncovered instances where questions of fairness and lack of transparency had been raised. States in Australia have made ground to improve the fairness of retirement village business models by regulating the length of time departing residents must pay ongoing service fees as well as requiring exit entitlements to be paid after a set period of time.
The rental model common in Canada also has many benefits that rectify the drawbacks of the licence-to-occupy model. However, the key consideration when comparing models from overseas markets is that many countries outside of New Zealand have very different attitudes, norms, standards, lengths of tenure, and protections that are not commonplace in New Zealand.
You can access the full report here.