Retirement villages operate under a licence-to-occupy model, with a deferred management fee (DMF) deducted when a resident leaves. This model allows upfront costs to be lower and enables operators to subsidise services, facilities and staffing during a resident’s stay.
This is not a hidden trap. Prospective residents make informed, deliberate decisions, backed by legal advice, which is mandatory under the law.
Most also consult family and friends, particularly those already living in villages. The trade-off is clear: a low-maintenance, secure lifestyle in a community of like-minded older Kiwis.
Te Pou’s claim that residents face excessive delays getting their money back requires context. On average, it takes around five-and-a-half months for a departing resident (or their estate) to receive their capital repayment. Over the last year, this has increased from four months because of a slowing real estate market.
This simply reflects the normal pace of property transactions, the same timeframe it often takes for new residents to sell and settle their own homes before moving into a village.
Village operators are motivated to relicense units quickly. No one benefits from unnecessary delays.
In fact, over 60% of operators now voluntarily pay interest if capital hasn’t been repaid after six months. Weekly fees stop accruing when a resident exits and the DMF is capped at that point, which is evidence that operators already share the financial load fairly.
We also support practical reforms. That’s why we’ve proposed a Hardship Provision as part of the Retirement Villages Act review. A targeted, workable solution for those in genuine need, without destabilising the entire financial model.
Labour MP Ingrid Leary’s Member’s Bill, which would mandate partial repayments within five days and full repayment within three months, misunderstands the resident-funded model on which the sector is based.
Operators do not sit on large reserves. Incoming residents’ payments are used to repay development debt and fund village infrastructure and services. Only when a new resident enters is the outgoing resident repaid and the DMF collected.
Independent analysis by Grant Thornton, using real-world examples from Canterbury and Auckland, found it takes over 20 years for most villages to break even. Retirement villages are long-term, capital-intensive investments, not cash-rich businesses.
International evidence shows the risks of poorly targeted intervention. In Australia, mandatory buyback rules led to increased fees and the closure of smaller, regional and charitable villages. If replicated here, similar rules could reduce options for older New Zealanders and drive up costs for all residents, the opposite of what’s intended.
About 130 older New Zealanders move into a village each week, making a conscious investment in their wellbeing and independence.
A major reason village living is within reach of so many is that unit pricing typically aligns with the median house price in the local neighbourhood. That means most residents can move into a village in the same area without taking on new debt or relying on family support. That affordability is a strength of the model.
Yes, the sector is commercial – and it must be. Without a return on capital, no new villages would be built, limiting options and increasing waitlists just as demand is growing.
The Retirement Villages Association supports a robust, evidence-based review of the Retirement Villages Act. We are not afraid of scrutiny; we welcome it. But let’s make sure it’s grounded in fact, not fear and misconceptions.
Let’s protect what works, improve what doesn’t and ensure older New Zealanders continue to have access to homes and communities that provide dignity, security and choice in their later years.
