Retirement village changes swap one injustice for another
Saturday, 20 December 2025
**Janine Starks is the author of www.moneytips.nz and can be contacted at moneytips.nz@gmail.com. *She has provided unpaid advice and services to the Retirement Village Residents Association as part of her consumer advocacy work.***
OPINION: Don’t be fooled by the recent Government announcement about changes to the 20-year old Retirement Villages Act. It was a disaster for the 56,000 residents living in villages around New Zealand.
The cliff-hanger clause was the speed of capital being repaid, once a resident has died or moved out of a village. It was the most financially material issue by a country mile. The proposed law will gift operators 12 months to sit on residents’ money while they attempt to relicense a unit. There will be a small interest payment accrued from the six-month point.
That’s one year, when the resident has never owned the property and shareholders take all capital gains. One year, when the average house currently sells in 50 days. One year, with no ability to force an operator to reduce the price and take a lower gain.
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In a shock move, the Government decided these new rules won’t apply to any resident currently living in a village – unlimited wait times will continue, for every person that fought for change.
Minister Potaka openly told the Retirement Village Residents Association that New Zealanders have no appetite for retrospective law changes, so 56,000 people are out of luck. That stems from the credit contracts uproar, where the Government tried to save ANZ and ASB from an active court case by changing the law.
I have to say, if the minister thinks 56,000 seniors, $29 billion in assets and an uncontrolled pay-back period is in anyway similar to saving the backsides of a couple of big banks, he’s read the room wrong.
New Zealand has 43,600 units at an average price of $680,000. That’s $29b, before operators take capital gains and a management fee. Residents will be repaid around $13.5b, with operators pocketing $15.5b. That’s a highly conservative estimate, with a 30% fee and 6% per annum capital gains, over a 7-year average life span. Unit prices don’t fall, even in the current market. Long term average gains are more like 8% per annum conservatively.
Government proposals also create a rear-end car crash where operators will be more incentivised to sell the unit of a new resident, rather than those with an old contract, to avoid any interest or buy-back responsibility.
Who wins from the new rules? Only 5% of residents. Given 95% of units are relicensed within 12 months, only 5% of people benefit. This isn’t an overhaul of the act, it’s a nuzzling up to operators and mopping up a few problem cases. It allows the continued use of the resident-funding-machine, for shareholders’ benefit, after death or exit.
After six months operators will pay interest, but this rate is determined by the Money Claims Act and currently sits at 4.7% (and falling). Operators value their own cost of capital at 13%. Yet they’re being gifted consumers’ capital at a steal – 2.35% is the weighted average of six months free and six months at 4.7%.
Given 77% of units are relicensed within six months, the interest payment only benefits 23% of people.
As is standard lobbying practice, operators pull on their doom pants as soon as politicians speak. Whatever tweak is suggested to the gold-plated model, they threaten to stop building units. That scares the government.
Build rates ebb and flow with economic cycles, interest rates, inflation and balance sheet mismanagement - not light-touch consumer protection. Given the tiny proportion of residents who will benefit, operator claims of financial pressure are preposterous.
To say there is disappointment in Ministers Potaka (National) and Costello (NZ First) is an understatement.
This was never about finding the middle ground between big business and consumers. It’s about operators with open-ended pricing power, offering conditions that exploit residents, operating under old law which isn’t fit for purpose.
The current 20-year old law (enacted by Labour) gave operators the right to wait to repay money, until the licence on a unit resells.
Fast forward to today and the Commerce Commission can’t comment on a contract term enshrined in law, so it can’t be tested in the courts. Neutralising the power of the commission and the New Zealand courts has given operators a big advantage.
By today’s standards, I believe there is a clear fault in our law. Had repayment terms been omitted from the Retirement Villages Act and left for operators to embed in standard contracts, I think it’s likely the courts would have found them in breach of the Fair Trading Act long ago. That’s still an option for the new act – let the Commerce Commission and courts react to market practices.
In my view, this Government has a strong reason to apply change retrospectivity, given the degree of unfairness that’s prevailed for 20 years, but I fear we are about to see one unfair trading term replaced with another.
The changes being proposed by the Government are:
1.If a unit is unsold, operators will repay residents in full after 12 months and pay interest after 6 months.
2.If there is a specific need, residents can apply for early access to some of their funds.
3.Operators will need to repair and replace chattels (residents don’t own these).
4.Weekly fees stop on death or exit.
5.There will be a new independent disputes scheme.
6.Legal documents will be more user friendly.
Readers should always seek specific independent financial advice appropriate to their own circumstances.