Boomers driving activism for ‘fairer’ retirement village deal

Saturday, 20 May 2023

More muscular activism for a fairer financial deal for retirement village residents is the result of assertive Baby Boomers moving into villages, says Brian Peat.

Ex-banker Peat is the president of the Retirement Village Residents’ Association (RVRA), which has grown its membership from around 3500 in 2020 to just under 10,000 today.

The RVRA’s push for a fairer deal has led to Parliament ordering a review of retirement village laws, and a Commerce Commission probe.

It’s also prompted the Retirement Village Association (RVA), which represents the businesses and charities which operate villages, to create a “blueprint” identifying and removing “perceived or real ‘unfair’ clauses” from its members’ contracts.

Peat characterised Baby Boomers as more assertive than the previous generation, and less likely to take “no” for an answer.

They were also hard to spook with predictions that introducing consumer protections could have a “catastrophic” financial impact on smaller retirement villages, even driving some in rural areas to the wall, a threat being talked up by the RVA.

“We are in the Baby Boomer generation, and we have gone through working situations where there have been restructures and reorganisations,” says Peat.

Peat says residents have heard the assertions that villages would fail, but says the village owners never back up their words with data.

Earlier this week, the RVA’s warning was backed up by Jarden investment analysts Arie Dekker and Vishal Bhula, who predicted a lessening of competition as it became more expensive to own and operate villages.

John Collyns, executive director of the RVA, says he has seen an increase in the militancy of activism.

“The oldest Baby Boomers are 78, so technically, they are moving in,” he says.

Data from large retirement village operator Ryman Healthcare released on Friday showed the average age on entry to one of its independent living units was 79.8 years.

The sole paid employee of the RVRA, executive director Nigel Matthews, says the expansion of the RVRA membership was potentially partly explained by a generational change taking place in villages.

“You’ve got a generation that are moving into these villages that are finding their voice more. They are not the ones with the stuff upper lip, who don’t say anything, and if it hurts, we just battle on, but don't like to complain or make a fuss,” he says.

Residents’ concerns have been making headlines more frequently, and that media coverage had played a part in driving awareness that change was possible.

“I think it’s thanks to media, which have raised the issues. Consumer NZ has raised the issues,” he says.

“I feel there’s a stronger voice of men in villages now, that are moving in for whatever reason,” Matthews says.

But he sayd it would be wrong to underestimate the part women residents were playing in the fight for a fairer deal.

Residents have a range of demands, which were first set out in its 2021 Framework for Fairness document.

The association hopes Parliament will use this as a template to set minimum consumer protections for retirement village residents.

It includes making village operators pay people their capital back soon after they have left a village, perhaps as quickly as within 28 days.

It also includes banning village operators from continuing to charge weekly fees, or accruing deferred management fees, after people had moved out.

But there’s also a growing call for retirement village owners to share capital gains on units, building on a white paper from The Retirement Commission Te Ara Ahunga Ora in 2020 which called for a review and reform of the retirement village industry.

People entering a retirement village typically pay for an occupation rights agreement, known as an ORA, which is a contract that gives them a right to occupy the unit.

When the resident leaves the unit, they, or their estate, get their money back, once a new ORA for the unit is sold. The amount they get back is typically equal to the amount they paid minus a 20% to 30% “deferred management fee”.

Any capital gain, or loss, is typically retained by the village owner.

Ryman Healthcare’s full-year results showed that even in a market of falling house prices, retirement village units do not necessarily fall in value.

It recorded that even though sales held “steady” during the year to the end of March, the value of the ORAs sold rose from $1.08 billion​ to $1.17b​.

The units in a retirement village are resold quite often. At Ryman, the average time a person would live in an independent unit was around six years, while someone moving into a serviced apartment would stay around three years.

Matthews says not sharing capital gains threatens to leave so little equity for the children and grandchildren of people moving into retirement villages that it threatened inter-generational financial wellbeing.

“Our concern is that if continue this down the track there will be a generation that won’t have the resources,” he says.

There is a lot of money at stake.

In a presentation to investors, Ryman’s chief financial officer David Bennett said if the company resold all its units on March 31, it would have sold them for $1.78b more than people had bought them for.

Ryman claims roughly 13,900 of the estimated 50,000 people living in retirement villages.

Collyns says even if the review led to law changes, he did not believe they would be applied retrospectively.

Matthews also felt the rise in resident activism was driven by the retirement village sector’s refusal to take action on unfair clauses in ORA contracts.

“If the sector had addressed things earlier, we wouldn’t be in this position now,” Matthews says.