John Collyns is the former Executive Director of Retirement Villages Association (RVA), a peak body representing the owners and operators of retirement villages in New Zealand. And retirement villages in New Zealand keep growing in demand, gaining an increased percentage of adults over 75 despite an overall growth in population.
But to what can this growth be attributed? John clarifies that the biggest strength of the retirement village operators in New Zealand is their offering to customers – one that prioritises security, consistency and peace of mind over financial gain. A position, that John argues, speaks directly to the desires and concerns of over 65’s.
At the time of recording the New Zealand government was proposing review and potential restructure of retirement village legislation which may disrupt this thriving ecosystem. John explains why the government is misguided in this policy decision, and why more regulation is not a solution to the industry’s problems.
Ash de Neef: Okay, John, thank you so much for joining us today.
John Collyns: My pleasure entirely .
Ash de Neef: You’re quite well positioned in the landscape of aged care within New Zealand to give us kind of a picture of the challenges and opportunities that are going on within the aged care sector. Could you give us a broad overview of what’s happening?
John Collyns: Ash just before we get too carried away.
Ash de Neef: Yeah.
John Collyns: Aged care and retirement villages are not the same thing. If you think of it as aged care as a continuum for older people. At my end of it, the retirement village end our residents are active, older, independent people. People who can live independently in their own homes, in the community or in a retirement village.
And then as care is needed, then they move to either a care facility, which has often co-located in the same village. Or the move to a hospital facility or something, which are offsite, but my residents are the active, independent end of the business.
Ash de Neef: It’s great to make that distinction first up.
Can you tell us about then how you see retirement villages fit into the landscape of services for older adults?
John Collyns: Okay. Very good question. Retirement villages were originally created over 60 years ago by a number of church and not-for-profit organisations basically in Auckland to house older people in surroundings, which was warm, and age appropriate and comfortable over time.
That particular model became adapted by commercial operators who understood the need to provide age appropriate housing in terms of size, accessibility, warmth, insulation, community, access to amenities like swimming pools or bowling greens, libraries, cinemas, that sort of thing. And therefore we’re able to develop a model which allowed the resident to pay a capital sum, live in the village for as long as they want to or are able to. When they died or went into care, their unit was refurbished and relicensed and a new resident moved in.
And the old resident was paid out a contracted amount in relation to how much they originally paid. So that particular model then basically got underway in the late eighties, and over the next 20 or so years, it was refined to the license-to-occupy model, which we enjoy today. So we have roundabout 14% of the over 75 population choosing to live in a retirement village. And that number has increased from 9%, five or six years ago to 14% today.
So not only has the numbers of 75 year olds in the population as a whole increased our numbers of our market share, if you like, has increased at an even faster rate. So a hundred people move in roughly every week. So quite clearly the industry is doing something right.
Ash de Neef: Yeah. And just to clarify that’s 14% of all over 70 fives in New Zealand are living in a retirement village.
John Collyns: That’s correct, around about 45,000 people.
Ash de Neef: Wow. That’s incredibly fast growing. What do you attribute this high growth rate to?
John Collyns: Several things. We know that when residents move in they’re looking for financial security, they’re sick and tired of repairing their own place. Maybe they’ve suffered earthquake damage, maybe they’ve got a leaky building problem. Or they’re just sick and tired of painting a fence.
And they want to move somewhere where all those problems of ownership are taken away from them. And they get to live somewhere warm and comfortable with friends, enough money to live on and a pathway to care. That’s the first reason.
Second reason, is that operators are themselves improving the offering all the time. So every new year comes, not only other buildings better, but also the operators understand what causes residents’ concerns and are moving to ease those problems.
So for example, we know residents get very worried about costs escalating out of their control. In Wellington city just right now, Wellington city council talking about a 17% rate increase, which if you’re on a fixed income, that’s a huge amount of money. In a retirement village, operators will often fix the weekly fees, which covers things like rates and insurance and all those sort of overhead costs.
So they’re fixed the weekly fees, so the inflationary issues around for residents are taken away and that people are finding is a hugely attractive thing. You know, almost to the last dollar. How much are you gonna pay today? How much you gonna pay in two years time and how much you’re going to get back when you leave the village.
And that sort of sense of financial security is incredibly important for our residents.
Ash de Neef: Yeah. And if if my knowledge is corrected, that’s something that’s lacking in the Australian system that we don’t have a price guarantee that. It can be adjusted as costs go up and down.
Why is it the case that it’s that the New Zealand system is able to do that?
John Collyns: The way the New Zealand system works is that when the resident pays the capital sum, they move into the village, they live in the village. And when they leave the deferred management fee, which is the bit the operator keeps it’s usually between 20 and 30% of the original capital sum, is deducted from the in-going price.
And then they refurbished the unit. The next resident pays and they pay a capital sum. And from that capital sum the first resident’s contracted amount is repaid. So if they’ve paid, say $400,000, they might get $300,000 back, the operator retains 25%, and you can see that sort of going forward into the future.
In Australia, the thing is different.
The deferred management fee comes off the sale price, the new resident has paid. So the outgoing resident gets a share of any capital gain. That means that the operator doesn’t have the resources available, at least not as much resource available to maintain the village to the highest possible level. To build new things, to make sure that buildings are weather tight, and all those sorts of things which go with ownership.
So the resident doesn’t have to worry about those things. The operator has the costs of ownership and the resident is insulated from that. And that’s the principle difference between the two systems to New Zealand, Australia.
Ash de Neef: Yeah. And there’s a good point there that in the Australian system, a resident may be exposed to a greater possibility of reward at the sale of the unit, but the cost is the possible downside there, and the lack of stability that comes as a result.
John Collyns: Yes, you’re perfectly correct. A very simple example. In this country, one of our listed companies has spent tens of millions of dollars on watertight leaky buildings remediation. None of that costs the resident a cent. Not 1 cent.
In Australia where the resident get to share the capital gain, they’d also be liable for those sorts of external costs. And the residents would suddenly discover themselves with an unpleasant surprise with a bill for several tens, if not hundreds of thousands of dollars. To remediate things because they are responsible for the ongoing maintenance of the buildings.
Ash de Neef: What were the circumstances that allowed these differences to flourish?
And do you see a way that in Australia that the uptake of retirement villages could be raised? Do you see there’s any way that could be turned around?
John Collyns: We have got two or three New Zealand operators who have gone over to Australia, Ryman healthcare in particular, for example, and they’ve taken with them, their New Zealand model, which is a market leading model.
And they have built, and opened three villages, I think in Melbourne. And in every case, the sale down based on the New Zealand model for Australians who are very anxious to utilise, that model has been outstanding. And in strong contrast, possibly with the Australian developers, who’ve stuck with their traditional model. The allure of sharing capital gain without realising the downside of the capital cost is often not quite so obvious perhaps on the good days when the market’s performing well.
Ash de Neef: So perhaps it’s not so much a change in the structure or anything, but we’ll just take a few more providers to come from New Zealand or at least have that approach to bring it to the Australian market.
John Collyns: We remain optimistic that the Australian market will actually see an observe and hopefully copy the examples of which we’ve got. But at the end of the day each industry, each country has its own population, it’s own market demographics. It’s own market expectations and every operator who’s successful understands those expectations, markets to them and provides a service which matches those expectations.
Ash de Neef: Now, given the success of retirement villages in New Zealand, it’s interesting to see that New Zealand government is proposing a review of legislation relating to retirement villages. What’s the legislation about, and what’s the feeling amongst providers about this?
John Collyns: That’s a huge question. The review of the legislation, which the commission proposes is a bit misguided. Because the commission has confused the consumer protection legislation and the retirement villages act, the regulations, the code of practice with all the various commercial terms, which operators use in their contracts to distinguish their village from their competitors.
So on the one hand, the regulations say the village has to be registered with the registrar for retirement villages and a memorial is placed on the title of the land so that resident’s interests are protected ahead of all the creditors. A statutory supervisor is appointed to make sure the village is being run in a financially prudent manner, and is there to protect the residents interests. There’s a complaints and disputes resolution scheme, and there’s a requirement for mandatory legal advice. That’s common for all villages and every resident understands that and that’s their protection.
And that’s the regulation, which the regulators think needs to be reviewed.
We don’t think it does. We think that’s world-leading. And in fact, we’ve got comments from both Australian and British organisations to say that our legislation is world-leading. On the other hand, we’ve got a whole suite of issues where residents are, have varying levels of grievance about not sharing capital gain, for example. Slow resale times or relicensing times, the treatment of weekly fees either when the residents living in the village or after they leave. Dealings with repairs and maintenance of chattels, for example, those are issues which relate to the commercial terms.
And we’ve said to the commission, “look, we understand that there are problems with some of these issues. We believe that we can sit down and work with you and the resident’s association to be able to resolve the issues, or at least find some way through some best practice examples or whatever it might be.” But we’ve said, “you should not try and regulate the commercial terms because you will instantly disadvantage people and reduce the choice available to new residents coming in.”
So that’s the balance which we’ve got and our submission, which we’re just finishing off now basically tries to emphasise that point.
And that goes through each of the various points of term, like mandatory buybacks or the sharing of gain or market resale and that sort of thing. To point out where the problems are in each one of those and what would happen if they would try to prescribe or regulate those, and what the impact of that would be on villages, on operators and on residents.
Ash de Neef: And I guess that’s going to link nicely to the conversation in Australia at the moment, following the release of the Royal Commission’s final report there, the ideas of where the government’s line ends and. There is a great value that can be placed on flexibility and fluidity within services that can be offered to residents and their families.
And to restrict them by legislation can have knock on effects that are undesirable.
John Collyns: We often see the different Australian states grappling with this particular problem. And we know we can see that the simple answer is to be more prescriptive of what you can and can’t do.
And we think that the easy answer is seldom the right one. What our regime is, we’ve got a sort of framework if you like of what people can do. And it’s whole thing is based on disclosure. So operators and the resident’s lawyers explain to the incoming resident what the parameters of the village are about.
And in other words, how much they’re going to pay, how much they’re going to get back, all those sorts of things that’s full and transparent disclosure. So a resident can firstly choose what sort of village they want.
Secondly, basically choose to some extent the terms, which they want to live by, and will know the last dollar with how much they’re going to get when they leave. And that’s all about disclosure. And whereas the Australian regime, seems you have a much more prescriptive, and you say, “you’ve got to do this, you can’t do that.” And therein lies the problem, which we want to avoid that.
Ash de Neef: Is the assumption here that there’s been a problem with the disclosure process or something that some people have entered into agreements that they feel have been unfavorable. Why do you think the case that the government is proposing changes?
John Collyns: I think really what’s happened is that the last 10 years in New Zealand has seen unprecedented capital growth in the property market and residents are seeing that reflected in the prices, charged by operators, and they feel aggrieved that they aren’t getting a share of that. Looking from their perspective they paid a significant capital sum, often hundreds if not millions of dollars over to the operator. And they see the operator then getting another half million on top of what they paid later on and they feel that’s unfair. They want to have a share of that.
As I’ve explained the reasons why that doesn’t work. And I think that’s what’s been driving a lot of it and what we haven’t done as an industry very well in my view is explaining to the residents, the downside risks, which I’ve explained to you.
And if you say to them, “look, what do you want? Financial certainty and no risk? Or do you want to have the possibility of a profit, but also the almost certainty of a loss and unexpected costs?”
And the residents we know say, “look, we want the financial certainty. You bear the cost. So it’s not our problem. It’s your village. You’ve built it. You look after it properly. We’ll just live in us and we’ll get the benefits from it.” and, If we were to explain that effectively to residents, hopefully they will see where we’re coming from and the clamor for sharing capital gain wi ll die away a bit.
That I think is the answer in a nutshell, really.
Ash de Neef: Now changing direction a bit and circling back to what we mentioned at the start about the continuum of care and that retirement villages can play a role in that. I imagine that the landscape of this continuum is going to be shaped a lot by COVID and the need to adapt to that new change.
How have you seen this change for the coming year?
In the past year.
John Collyns: In the past years. Okay. This time last year, almost exactly, New Zealand went into level four lockdown. And of course we were locked down, I think for six weeks at level four or whatever it was. And that included all retirement villages. So the first thing which we did – as the aged care side of the business, are used to the concept of managing infectious diseases.
So the concept of a lockdown was not that unusual for the aged care side of the business, but of course, a lockdown for something like a tummy bug is a matter of a few days rather than months. So the scale of this particular lockdown was far greater. And as a result, the pressure on older people was also that much more acute.
So villages worked very hard to make sure the residents were kept occupied. They were kept happy. Their mental health was looked after, but also their physical health was kept after by having guards of the gates and only essential workers coming in and all that sort of stuff. And over time, people came to accept how that worked.
This association, we put a lot of time issuing instructions to our members on what they should do and how they should do it, and instructions to residents and their families about how they should look after the lockdown.
One of the first things we found afterwards is that we were very fortunate in that we had maybe two or three cases of COVID-19 in a village. Tragically one person died but they’d just come back from one of those cruises and he and his wife were really sick. A manager contracted it down south from her husband who was visiting one of the clusters, which we had down on the south island.
But apart from that the industry managed the COVID-19 in the retirement villages extremely well. And what we found afterwards was people who lived outside the village, looked over the fence and saw our residents being happy and entertained and safe and secure said, we want a part of that.
And we found that inquiries escalated dramatically. Of course we couldn’t do much about it until we moved to level two. But nonetheless, there was a huge degree of interest, not only from the older people themselves, but from their families, the children living overseas, who wanted to be sure that their parents were safe. And for them a retirement village was the absolute answer for that. So that was that is the sort of short-term effect.
In the longer term, we will see that people view villages as safe havens and as an industry, what we want to do is make sure that safe haven image, in fact just translates into reality. So one of the sort of things which we’re looking at doing is establishing a pandemic committee.
If you like a committee of experts who can give us advice on not just epidemiology issues, but also on design and construction, IT, security, all those sorts of things which we can build into the design of the villages to make sure that they are, should we say, disease resistant.
And that means the residents are not only seem to be safe, but are actually safe. That’s one of the longer term things which we will put into place once we’ve got our responses to the retirement commission out of the way.
Ash de Neef: Do you think that inevitably there’s going to be some compromises there between the feel of the village and the safety, and perhaps even would there be compromised with functionality?
For example, if you had to move off a more high intensity care facility away from a retirement village. How do you see those compromises?
John Collyns: I guess around about 70% of New Zealand villages have an aged care facility on the campus? So unlike Australia, where a minority of villages provided a genuine continuum of care, the majority of ours do and always have done.
So the first step was to make sure that everybody in the total complex was safe. Villages with a care component often took a stricter approach to making sure their residents were safe because they were more vulnerable than the village resident community as a whole. But one of the key things that we said as an industry to our members, “look, we don’t want our residents to feel disadvantaged just because they live in a retirement village.”
They shouldn’t have any fewer advantages or greater impositions on them than the same age cohort in the wider community. So if 75 year olds are unable to mix and mingle and go to the supermarket and do this, that, and the other then, so too, should our residents be able to do that. And we, as an association, we took quite a strong view on this one.
But having said that we know that if you’ve got a aged care facility and your village is a smaller part of their business than the aged care facility, then yes, you may need to have a high level of lockdown, or a higher level of restrictions if you like then a pure village, which a pure lifestyle village, which has no aged care.
But that was the balance, which we tried to strike with our members and residents rights during the lockdown.
Ash de Neef: Yeah. Fantastic. It’s going to be a balancing act the world over to get that combination. And you mentioned earlier that there’s a resident’s rights association in New Zealand as well?
John Collyns: We have a retirement village residents association. They’ve been around for a long time, but only in the last five years or so they’ve actually got much more active. They’ve got a very live wire president, a chap called Peter Carr, and he’s got a team of people with him who work hard to make sure residents interests are advanced and their voices are heard.
So at the end of last year, we realised that as an organisation the resident’s voice wasn’t as well heard as it could have been. So we signed a memorandum of agreement with the residents’ association, which sets out the way, which we work with each other. To deal with handle complaints and dispute problems in a way which is cooperative and friendly and respectful.
We talk about how are we going to deal with the media and there’s a no surprises policy. In this one, we talk about how we might improve the training available for our managers and staff. We talked about how individual village residents committees might be more effectively looked after so that they have a genuine mandate from the resident’s body as a whole to talk on their behalf.
Those sorts of issues. Talk about where we can resolve policy issues ourselves and reach an agreement on them, then we will do so. If we agree to differ on something, they will do so respectfully and say,” yes, this is where we’re both coming from on this particular issue”, and leave it to somebody else to reach a conclusion if you like.
But the whole point of having a memorandum of agreement was to make sure that we listened to each other in a way which was respectful and constructive. So we didn’t just shout at each other through the media because we’ve seen how bad that is for everybody. When people just shout at each other through the newspapers or the radio.
So doing it in a way which is more constructive, we think is going to get a much better outcome for both parties.
Ash de Neef: Yeah. Great. And you very nicely anticipated my question there about how you how you would coordinate with them. And I can imagine that as legislation changes are brought up or any sort of discussion is coming up, it’d be great to present a unified front and outline clearly which issues you’re aligned on and which ones you aren’t.
John Collyns: Unfortunately, this particular white paper has actually drawn quite heavy lines down between us, on some of the points. What we’ve tried to say is these are the reasons for it. And maybe we haven’t communicated that very well, but let’s see where we can find a common ground if that’s possible.
Ash de Neef: Great. And now just casting an eye towards the future. How do you see the growth of retirement villages shaping in the next couple of years, or how do you see it’s place within a larger care continuum changing? Do you think it’s going to continue growing or what do you think there?
John Collyns: The expectations is it will continue to grow. The population is ageing as it is in Australia, and we’ve also seen that the market share has risen from nine to 14% over seven or eight years. We don’t see that changing anytime soon. And as we are able to explain the benefits of living in a village to the wider population, we will expect more people to actually buy into what we’re offering, because we do offer a lot of security, peace of mind all those sorts of things, which eighty year olds really want.
Trying to explain to somebody who’s just starting out on the housing data about how sometime in the future, they might not want to own a house. They might actually want to go have a different structure about where they live, it’s not that easy. But when you’re 80, it’s a much more obvious decision.
And we would see that the needs of yesterday’s 80 year olds are no different to today’s 80 year olds, which would be pretty similar to tomorrow’s eight year olds. So provided we continue to do deliver on the promise, we would expect that the numbers will continue to grow.
Ash de Neef: And now attracting residents is one side of the coin, but how are you attracting providers into the space as well?
Are there many aged care providers who aren’t already in a retirement living space?
John Collyns: Yeah, there are actually there’s quite a lot. The subsets I saw two or three years ago, so I’m not sure how current they are right now. I think roundabout 70% of retirement villages have an aged care facility on the campus, but only 45% of aged care facilities have a retirement village.
So there’s a significant number of pure stand alone aged care facilities. Now what’s going to happen with those is the $64,000 question because many of them are small, old and often in rural provincial New Zealand and they are up against competing with some very smart, very attractive facilities. Mostly the attractive ones are more expensive.
So there’s a balance here between what you’ve got and what you can afford. But it’s probably fair to say that there have been virtually no new standalone aged care facilities built in New Zealand, which aren’t part of a retirement village.
And to put it the other way around – every new aged care facility has been part of a retirement village, because the retirement village capital cross subsidises the construction of the aged care facility.
And that’s quite an important point because the government subsidy has been basically fixed more or less for a long time. And it’s never enough to provide the genuine cost of capital. So what we’re finding now is the need for aged care residents to fund a greater portion of their care where they can.
And what we’re finding is the development of premium care rooms and care suites. And residents can either pay a weekly fee to live in a nicer room, with a better outlook or whatever, might be. Or they purchase an occupation agreement as they would in a retirement village over a 60 square meter care suite, for example.
And as soon as I do that, then they come under the retirement villages regime because the capital sum payment means that they are part of a retirement village. And the operator in operating that particular part of the care suite is operating a retirement village and has to comply with the retirement villages legislation.
And so the way which we see things happening, I think in time is that we will continue to build standard, subsidised rooms, which are, say 11 to 15 square meters. But we’ll also have a far greater emphasis on bigger care rooms, which can be sold either for a capital sum or at a weekly premium. Yeah.
Ash de Neef: And I guess tied into all of this is this idea that it’s less cut and dry. There’s a lot of give and take between the different elements in this continuum. As you were describing, a different size of suite would come under retirement, living arrangements and other situations. It’s a lot of grey areas here.
John Collyns: It is. And allied to all of that, of course, we’ve got home ownership has been declining now for a number of years. It reached a peak in the 1970s where the home ownership of somewhere between 75 and 80% or something.
Today we know that. around about 30% of the over 65 population don’t own a home. Home ownership is probably in the upper sixty percents across the nation as a whole these days. And if you don’t have a capital sum upon which you can draw to pay for your retirement village unit or indeed your aged care then we’re going to have some issues.
And one of the things that the commission’s white paper canvases is things like social housing. And I would be remiss if I didn’t note that we have a number of operators, particularly in the not-for-profit space who have a missional approach to the provision of social housing for older people.
And, I know one for example, is building a brand new village in Wellington. And I think 5% of those units are going to be affordable rentals or social housing units. While we don’t see the industry itself as being the answer to social housing, we want to be able to be part of the housing solution by releasing family homes, back into the community every time a resident moves to a village.
I’m not sure that answers the question actually, i got a bitt sidetracked. It’s one of my favorite subjects.
Ash de Neef: That’s really, it’s interesting. I didn’t know that there was a way to give back in that sense. I wonder with this idea of the continuum, and we’ve heard how retirement living and higher care facilities are blending.
I guess there’s going to be a move towards staying in your own home for longer, without moving. Do you see that there is a way to blend the retirement living and people remaining in place?
John Collyns: Yeah, that’s a very good question. You’re absolutely right. So we are part of that continuum. And in New Zealand, if you were assessed as needing at home services these can be provided to you in a retirement village.
Occasionally they are provided by the retirement village operator, but more often by an external provider under contract to the local district health board. That’s a point of concern for us. We think we can do that, but we won’t worry about that now right now.
But because a retirement village resident in their own unit in the village could get at home care, then we would see that being a natural part of the continuum of care in the future.
So yeah, the government in New Zealand has quite clearly focused that home care is a better option than putting into people into residential care. Residential care operators will have a view on that, as far as we’re concerned, we are happy to assist the government in providing care for people at home if that’s what they needed.
Of course the tension then comes between people. The family wanting to keep their older person at home for as long as possible for whatever reason. But in fact, the level of care they need is so acute that they would be actually better off moving to a care facility.
And that particular tension isn’t going to go anyway, go away I’m afraid.
Ash de Neef: Yeah, absolutely. John we’ve covered a lot today and in a surprising amount of detail, it’s having not being an expert on any of this it’s been interesting to get a broad overview and to get into the nitty gritty with some of it as well.
Is there anything you wanted to talk about before we leave it for today?
John Collyns: I think probably we have covered most of it as the commission’s white paper is really much occupying top of mind right now.
So once we’ve got past that, we really want to put in place some other initiatives around the pandemic panel and those sorts of things. Working with the residents association on getting some industry best practice guides out to it to address the concerns residents have, that’s going to be our task for the foreseeable future.
Along with establishing a more effective training regime, which I mentioned, but didn’t really touch on in great detail. One of the areas where Australia is actually very good at this, is in the training regime and we will be looking closely at what’s being provided in Australia to see what we can Kiwi-ise over here and make use of and adapt for our own use.
So that’s going to be one of the next challenges over the next two or three years is actually making sure that our staff are not only empathetic, but are also very well trained on what they can do and make sure resident’s lives are as good as they can be.
Ash de Neef: Absolutely the number one priority. John, thank you so much for your time today. We really appreciate it.
John Collyns: You’re very welcome Ash, it’s been absolutely my pleasure.