Could ‘accommodation bonds’ help solve NZ’s aged care crisis?

Tuesday, 26 May 2026

New Zealand’s residential aged care system is in crisis, and introducing refundable aged care accommodation bonds could be part of the solution, business consultancy firm Grant Thornton says.

But the Aged Care Association is not convinced ‒ as the option would only work for older people who have the necessary funds, and that’s not the majority.

Many aged care facilities have struggled over recent years, with operators drawing attention to funding issues, and some facilities closing down and leaving some regions without any rest home care.

That’s already a problem, but the pressure is set to intensify, with the number of Kiwis aged over 65 expected to increase from about 900,000 now to about 1.3 million by 2040.

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There are currently about 34,000 people in residential age care facilities while 80,000 use home and community services annually, but demand is expected to sky-rocket over the coming years.

Grant Thornton’s retirement village services lead Pam Newlove said the challenge was that operators were not building enough aged care facilities because the investment did not stack up.

“But the ageing population means there is a huge pipeline of people that will need care, so where will they go?

“Without aged care facilities in the community, elderly Kiwis are more likely to end up in hospital for longer, which puts pressure on our already struggling healthcare system.”

It also costs more, with a 2024 Aged Care Association submission estimating the cost of public hospital care at up to $1700 per day, whereas residential aged care costs around $370 a day.

Newlove said funding needed to be flexible, and introducing a system where a refundable accommodation bond was an option for those who could afford it could be part of the solution.

When an older homeowner sold their house, they would have the option to pay a large lump sum ‒ a bond ‒ for their residential care that would be repaid at the end of their stay, she said.

“Where this is applied successfully overseas, the sum is typically around 65% of the median home in the area. At the end of their stay in the facility, the resident or their family would receive their deposit back, minus fees that are set by the length of their stay.

“Those who can’t meet their accommodation costs based on means assessment, can be subsidised by Government support.”

The bonds would provide a big cashflow boost to the sector which could be used to fund the development of more facilities and possibly to reopen recently closed rest homes, she said.

“They would reduce the amount a developer must borrow to build new facilities and make the sector more attractive as an investment. The bonds sit as a liability on their balance sheets, to be paid back in future, and used in restricted ways to fund capital works.

“More aged care facilities would immediately alleviate pressure on the healthcare system, freeing up hospital beds and cutting costs in primary healthcare. It would also take stress off families in underserved regions.'

Newlove said it was not a quick-fix funding solution, and would require new legislation and an initial set-up cost and ongoing expenses, and the Government would have to underwrite it in case of operator failure.

“Budget 2026 is the perfect opportunity to start laying the groundwork for a major overhaul of the current system.”

In Australia refundable accommodation deposits were part of the system, and the rate of failure was low, so there was a model that could be looked at, she said.

“We need to increase the amount of capital circulating in the aged care facility space to make it more investable, and this is one way that might help.”

But Aged Care Association chief executive Tracey Martin said bonds, or RADs as they were known in Australia, only worked if people had money.

They were not that different to the occupational rights agreements (ORAs) used in retirement villages, and some providers had started putting ORAs on their aged care suites, she said.

“That’s fine, it’s another option for people. But 40% of people aged 65 and over have virtually no other income besides NZ Super, and another 20% have only a little more.

“Meanwhile, the home ownership rate is declining, and within the next 24 years 40% or 660,000 of our seniors will be renters.”

The majority of seniors who needed residential care would not have the lump sum of money, or a house to sell to fund a bond, so bonds would work for about 40% of them, but for the larger group it would not, she said.

“Bonds wouldn’t lead to more funding for care beds for charities, not-for-profits or smaller operators in the regions, and that’s where the largest challenge is for the country.

“We’re not opposed to the idea, but it won’t solve the biggest chunk of the problem. For now, we’re waiting to see what the Aged Care Advisory Group recommends.”

Last year the Government set up the Aged Care Advisory Group to “identify the changes needed to the aged care funding model in order to build a sustainable system that is easier for people to access and navigate”.

A spokesperson for Minister for Seniors Casey Costello said the minister had recently received a briefing from the advisory group, and it was looking at a range of options that would mean substantial reform for the sector.

But he did not recall the prospect of aged care accommodation bonds being raised in the discussion.

A draft of the advisory group’s report was due in the next couple of weeks, and the final report was expected by late June, maybe early July, the spokesperson said.

“We want to see the group’s recommendations out and progressing, but we’ll just have to wait and see what they recommend.”