Retirement Village Fox in the Hen House by Government Decree

The new proposed Victorian Retirement Villages Act 1986 has put the Fox in the Henhouse by government decree. 

As though written by operators for operators, brushing residents aside in their insatiable pursuit of even bigger profits.

Retirement Village Financial Deception

Loan/Lease, Loan/Licence retirement villages as discussed here constitute 74% of the marketplace, 72% are owned by commercial 'for-profit' operators.

Example of a loan/lease retirement village. (no share of capital gain to resident, around 50% of the marketplace.)

• A retiree pays say $800,000 to enter a Retirement Village, not to own, simply to obtain a conditional right to occupancy.
• This entry cost is often in the order of an actual 'purchase' cost of a similar specification unit within the general community. Communal facilities, longer term security of tenure often the only defining differences.
• Operator takes $288,000 (36%) of this entry payment over the first 4 years by way of a deceptively named 'deferred management fee'.
• Operator now holds a $512,000 interest free loan from the occupant until after they depart from the village. Government legislation protects the operator from having to repay the loan on the day the occupant departs, under state government laws it can be up to six months or more.
• The village occupant pays all management, maintenance, refurbishment, selling costs on a property they will never own, only occupy. All the financial responsibilities of property ownership but in reality only conditional occupancy.
• Average industry maintenance/management fees are stated as $564 per month. The resident would pay in the order of $564 x 12mths x 10yrs = $67,680.00 in fees over the occupancy period on a property not owned by them, only a conditional right to occupy.
• On departure the resident can pay a unit refurbishment cost in the order of $50,000.00.
• The value of the occupant's $512,000 loan to the operator would be impacted by inflation (at say 2%pa ) totalling a devaluation over the 10 year occupancy period of some $93,658.72.
• Present day value on departure of the refundable amount payable to a departing retiree after 10 years is now down from the original $800,000 at entry to just $300,661.28 on departure. A lifetime of savings some $800,000.00 reduced by $499,338.72 to just $300,661.28 in 10 years.
• This -$499,338.72 capital value reduction having a direct impact on the ability of the retiree to – 1. fund a personal change in circumstances, 2. fund Home Care or Residential Aged Care costs, leave financial legacy for their family or beneficiaries.
• Across the entire village, the combined total loss to just 100 retirees would be in the order of 100 x -$499,338.72 per retiree = $-49.93 million dollars.

Interestingly had the retiree remained in the family home, at say a modest 4%pa capital appreciation, the value of the $800,000 family home over that same 10 year period would have grown to $1,184,195.43, a capital value increase of $+384,195.43. The 'retirement village' decision taken by the retiree generates a grand total capital value loss over the 10 years of -$883,534.20 ($-499338.72 + $-384,195.43).

Over that same 10 year period the village operator has gained -

100 units x $93,658.72 in maintenance/management fees. Total = $09,365,872.00

100 units x $50,000.00 in refurbishment fees. Total = $05,000,000.00

100 units x $384,195.43 in capital appreciation. Total = $38,419,543.00

100 units x $288,000.00 in Deferred Management fees. Total = $28,800,000.00

Grand Total = $81,585,415.00

In just 1 x 10 year period, in just one retirement village of 100 units, retirees lost capital value to a total of $-88.3 million dollars whilst the operator gained $+81.5 million dollars.

An Annual Return on Asset for the operator in the order of 10% per annum. Incredibly but not surprisingly if the operator needed to leave say $10 million dollars of working capital in the business, a total Annual Return on Investment would be a staggering 80% per annum.

The retirement village industry is best summed up by the following statement -

“Governments, Taxpayers, Retirees and their Families need to be aware that what we are talking about here is the transfer of personal and inter-generational wealth, not to fund a personal change in circumstance, not to fund home care or aged care costs, not for the benefit of families or beneficiaries, but into the pockets of hard nosed, profit driven, commercial operators.”

Legislators with policies that encourage retirees to cash in the value of the family home and enter a loan/lease retirement village fail to understand the staggering capital wealth reduction inflicted upon the retirees and their families. Australian taxpayers are then called upon to help fund that same retiree's Home Care or Residential Aged Care costs as a direct result of those policies.

This transfer of wealth from retirees to profit driven commercial operators takes place under a protective legislative umbrella of the state governments, all under the guise of the benevolent provision of retirement living. Any days of benevolence rather than profit in the retirement village industry are fast fading into history as 72% of retirement villages are owned by 'for-profit' operators. An industry that comes at a staggering financial cost to those retirees who innocently and naively enter the 'retirement village' financial trap.

Fix Retirement Income System

"Australia must confront fundamental problems with its retirement income system" https://t.co/rGztLJx7Pr? #auspol pic.twitter.com/z01FVcIQGg

— Les Scobie (@retvilldotnet) June 11, 2020

Social Housing Demand

"Money for social housing, not home buyers grants, is the key to construction stimulus" #auspol #auspol2020 https://t.co/V8ZmNofw3m

— Les Scobie (@retvilldotnet) June 1, 2020

Retirement Villages Have Had Their Day

Retirement villages — walled, gated and separate seniors' enclaves — have had their day according to this article at ABC News - https://www.abc.net.au/news/2020-05-11/retire-the-retirement-village/12229702

"The word "retirement" is redundant and engagement between people of all ages is high. That's how participants in the Longevity By Design Challenge envisage life in Australia in 2050.

Their challenge was to identify ways to prepare and adapt Australian cities to capitalise on older Australians living longer, healthier and more productive lives. Their vision, outlined in this article, offers a positive contrast to much of the commentary on "ageing Australia"."

Read the full article at this link - Retirement villages have had their day

Victorian Retirement Village Act Hurts Residents

Role of government is to create an environment for commerce. The Vic #retirementvillages Act provides this but fails to protect retirees from financial and emotional harm from it. Payment of ingoing $ without transfer of property ownership major contributor. #springst #vicpol pic.twitter.com/ZyEbFE17PO

— Les Scobie (@retvilldotnet) February 19, 2020

Retirement Villages Transfer of Wealth Away From Families

"Families need to be aware that what we are talking about here is the transfer of intergenerational wealth, not to families, but into the pockets of large multi-nationals. Shame about elderly people not having enough money for aged care." Tom Gait, RVRA." #auspol #vicpol @ABCGM pic.twitter.com/UhFC374SHU

— Les Scobie (@retvilldotnet) January 3, 2020

Heartbroken AVEO Retirement Village Residents

The Courier Mail reports -

"ONE of Australia’s largest retirement village operators Aveo Group has denied accusations of elder abuse against residents of an inner-Brisbane village.

Residents of Newmarket Aveo Village claim the company’s conduct over its planned redevelopment of their homes has left many of them “wishing to die”.

They allege Aveo Group turned their “quiet, happy, functional place” into a “nightmare retirement” that is like the “drip-drip-drip of Chinese water torture or the death of a thousand cuts”.

The company has denied the claims or any knowledge of allegations of elder abuse or exploitative conduct against it."

Read the full story here - https://www.couriermail.com.au/questnews/north/heartbroken-retirement-village-residents-wishing-to-die/news-story/db1f41bdfa5402c54296b2114f5746b8

Retiree Housing Policy & Aged Care Funding

Is government policy on retiree housing simply self-defeating? Short term boost to spending but giant hit to existing problem, Aged Care Funding and the impact on the budget and taxpayers. #agedcare #agedcarerc @MichaelWestBiz @acccgovau @JoshFrydenberg @AlboMP @annabelcrabb pic.twitter.com/OMEmSkk5NY

— Les Scobie (@retvilldotnet) July 26, 2019

Sadly No Breaking News On Retirement Village Reform

Difficult to understand why this particular Labor @DanielAndrewsMP Government and Minister @MarleneKairouz have been failing Victorians with a lack of meaningful #retirementvillage reforms. 'Delivering for all Victorians' is a phrase that rings hollow here @abc730 #vicpol @sdanck pic.twitter.com/OmQjenzEek

— Les Scobie (@retvilldotnet) June 27, 2019

The Transfer of Intergenerational Wealth.

Issues with the retirement village industry can be best summed up by the following statement from Mr. Tom Gait, the then President of the Retirement Village Residents Association.

"Families need to be aware that what we are talking about here is the transfer of intergenerational wealth, not to families, but into the pockets of large multi-nationals. Shame about elderly people not having enough money for aged care."

Retirement Housing Does Matter.

Retirement Housing Matters - "If the people cannot trust their government to do the job for which it exists, to protect them and promote their common welfare, all else is lost" - @DanielAndrewsMP @MarleneKairouz @michaelobrienmp #vicpol @sdanck @abc730 pic.twitter.com/e6YOKYbC4U

— Les Scobie (@retvilldotnet) June 16, 2019

Government Denies Rent Assistance To Retirees.

.@ScottMorrisonMP gov't denies rent assistance to retirees who pay more than $207,000 to enter #retirementvillage, not to buy simply lease. Needs strong voices in Canberra to fight for change-Impacts hard on elderly single females @HelenHaines1 @zalisteggall @JacquiLambie @sdanck pic.twitter.com/gWsaupLC5R

— Les Scobie (@retvilldotnet) May 20, 2019

Renting Much Cheaper Than A Retirement Village

Makes you think. Are the extra trimmings retirees are paying for in a #retirementvillage worth the cost over and above the actual value of the accommodation. @TaniaMaxwell14 @TerpsMLC @FionaPattenMLC @DanielAndrewsMP @MarleneKairouz @michaelobrienmp #vicpol @abc730 @acccgovau pic.twitter.com/SOQJwLCA03

— Les Scobie (@retvilldotnet) April 15, 2019

Retirement Villages In Words and Pictures

A summary of the Retirement Village industry in words and pictures. @acccgovau #auspol @KenWyattMP @ScottMorrisonMP @Bowenchris @billshortenmp @abc730 @TaniaMaxwell14 @TerpsMLC pic.twitter.com/iuUf1wozsp

— Les Scobie (@retvilldotnet) March 23, 2019

Transfer of Retiree Capital Wealth to Multinationals

Sums up NSW #retirementvillage industry beautifully "Transfer of intergenerational wealth not to families, but to large multinationals" Tom Gait President RVRA. Only Labor is offering an industry Ombudsman @GladysB @smh #nswpol @michaeldaleyMP #nswvotes2019 #nswelection #nswvotes pic.twitter.com/rxhvqdsO3w

— Les Scobie (@retvilldotnet) March 19, 2019

Government By The People But Not For The People

Retirees leaving retirement villages have to wait 6 months to get back the money they loaned to the operator on entry, where do they live whilst waiting. Government by the people for the people, I think not @GladysB @smh @michaeldaleyMP @Matt_KeanMP #nswvotes2019 #nswelection pic.twitter.com/a22xA6UU8b

— Les Scobie (@retvilldotnet) March 18, 2019

Retirees Spiral to Financial Doom

Retirees spiral to financial doom because Minister @Matt_KeanMP likes #retirementvillages and thinks they come at no cost to government. But wow! Look at the cost to the retiree. Is it not government for the people not the developers. #nswpol @GladysB @michaeldaleyMP pic.twitter.com/Ls8zHKUxri

— Les Scobie (@retvilldotnet) March 4, 2019

Labor Divided On Retirement Living Ombudsman

NSW Labor supports a Retirement Living Industry Ombudsman, sadly Victorian Labor does not. @GladysB @Matt_KeanMP @michaeldaleyMP @NSWLabor #NSWpol @DanielAndrewsMP @MarleneKairouz @VictorianLabor #vicpol pic.twitter.com/1VWbKXUHGg

— Les Scobie (@retvilldotnet) November 30, 2018

Retiree Advises Stay At Home

‘Stay home’: Warning about buying into retirement villages https://t.co/uxSwvrpArT - When will legislators stop being seduced by the industry machine and actually do something about it. @acccgovau @ACurrentAffair9

— Les Scobie (@retvilldotnet) November 23, 2018