Concerns about increasing weekly fees and financial stress is a frequent message from village residents but operators can’t shoulder all the blame.
In our ongoing discussion about living in a retirement village, I am taking a look at the research into the week to week fees.
The data that I will refer to comes from the 2011 McCrindle Baynes Village Census we commissioned with leading independent research firm McCrindle Research. They sampled 10,200 village residents with a confidential pen and paper booklet of close to 50 questions.
What is startling, is that 21 per cent of those 10,200 village residents declared that they were financially strained when they moved into the village – meaning from ‘day one’ they were under pressure.
In fact only 40 per cent of those surveyed said they felt financial secure. Money was short and most people had to be careful.
In fact 13 per cent had less than $100,000 in cash and other assets. The longer they lived after joining the village, the more they would inevitably eat into their savings – making things even tighter, financially.
To give this some perspective, most people (83 per cent) paid weekly fees of less than $150 but the single pension (today) is $430 a week – so they have just $280 a week to cover all their living expenses including health. Not much at all.
Being in the village however is seen as a beneficial. Knowing what it was going to cost each week, according to 59 per cent of respondents, gave them budget security. And there are no surprises compared to the alternative of living in your own home, faced with not knowing when a bill will arise and how much rates and other expenses may increase.
Legislation specifically requires that fees cannot rise by more than inflation, with two exceptions.
An emotional issue
The consequence of all this is that money understandably becomes a very emotional issue for many residents. Questions are asked of the operator when fees appear to be going up and residents who are financially strained can resent the better off residents who vote for the village to incur extra costs, like, for instance leaving the air conditioning on in the community centre.
But village residents are in fact in an extremely favourable position when it comes to controlled budgeting. Legislation specifically requires that fees cannot rise by more than inflation, with two exceptions. Taxes and utilities can’t be controlled and if they rise more than the CPI, the residents have to accept it. And if 75 per cent of residents vote for a new expense or an increased cost then everyone has to comply.
The pension too is indexed to rise at the same rate as real weekly wages, which is usually higher than inflation.
Into this emotional mix flows a high level of misunderstanding which creates angst. More than a third of residents (35 per cent) believe the operator makes a ‘significant profit’ from weekly fees while another 32 per cent believe they make a ‘slight profit’. In other words, while residents feel they are struggling to make ends meet, 67 per cent of them believe that the operator is skimming these fees.
That belief is wrong. Legislation requires that operators do not make any profit from these fees.
Many operators in fact make losses each year, not recovering all costs and not asking residents to fill the gap.
This misunderstanding about profits from fees remains a major bone of contention for many residents but it is based on ignorance and poor communication by the operators (and resident committees).
Lack of communication, empathy
The operators to my mind are at fault here. They should better explain these simple facts and resident committees should assist in this.
In my opinion there is also a lack of communication and empathy by many operators and their staff in truly understanding the financial stress that many of their residents live under.
Of course, not all operators are perfect either and some bad behaviours happen. For instance an operator may place a cost in a budget that they will call a village maintenance cost – a village cost – when it should be maintenance of a capital item which the village operator has to pay for. And should residents have to contribute to the payroll tax cost of large operators?
Making sensible decisions
The core statistic I keep returning to is that 21 per cent of new village residents could not comfortably afford the village they decided to move in to. From day one there was always going to be ‘financial stress’. This is difficult because these residents are adults and have to take responsibility for their decisions. This is not an ‘operator problem’.
And operators should not be criticised for ‘increasing fees’ if those increases are within legislated guidelines (and the operator is not making any income from the increases).
Well, that is my opinion. What do you think?
Discussion4 Comments
Frankly Frank, I wish the position you have outlined above was the beginning and end of it. If it was then a lot more residents in NSW would be a lot happier I assure you. You state above:
“But village residents are in fact in an extremely favourable position when it comes to controlled budgeting. Legislation specifically requires that fees cannot rise by more than inflation, with two exceptions. Taxes and utilities can’t be controlled and if they rise more than the CPI, the residents have to accept it. And if 75 per cent of residents vote for a new expense or an increased cost then everyone has to comply.”
May I point out that Sections 104 and 106 of the RV Act in NSW and Clause 24 of Regulation 2009 allows the legality of contracts which can set Recurrent Charges “otherwise than according to a fixed formula”. To the best of my knowledge hundreds of villages operate under that type of contract (as distinct to the “not-fixed formula – not exceeding variation in CPI” type of contract) and the consequence is that proposed budget expenses (and therefore the Recurrent Charges) bear no relativity to say a tiny 1.6% CPI increases. In my own village the Recurrent Charges went from $513 per month in FY14 up to $653 (under an NCAT order) in FY15. That’s a whopping 27.3% increase.
Presently, for FY16, the operator is seeking another rise to $774 per month – that another huge 18.5% increase. Residents have already voted this down, so either the operator will now offer a lower budget and seek a second resident vote on a lower amount, or else take the original amount to NCAT for their decision enforcing the higher levy amount onto residents.
So I don’t see how you can (frankly) say: “village residents are in fact in an extremely favourable position” at all!
Another point you make needs clarification I believe. You say above:
“Into this emotional mix flows a high level of misunderstanding which creates angst. More than a third of residents (35 per cent) believe the operator makes a ‘significant profit’ from weekly fees while another 32 per cent believe they make a ‘slight profit’. In other words, while residents feel they are struggling to make ends meet, 67 per cent of them believe that the operator is skimming these fees.
That belief is wrong. Legislation requires that operators do not make any profit from these fees.
Many operators in fact make losses each year, not recovering all costs and not asking residents to fill the gap.
This misunderstanding about profits from fees remains a major bone of contention for many residents but it is based on ignorance and poor communication by the operators (and resident committees).”
I rather sense that you are almost defending the poor honest, well meaning angel of an operator who always works closely and honestly with committees and residents and will stoically bear any deficits based on bad budgeting or over expenditure without a murmur of complaint. There maybe some like that but I don’t know them. I wish I did. In my experience after almost 12 years living in our village and actively serving on committees and study groups assisting in establishing viewpoints on legislation changes, that is not the reality at all.
I agree that legislation attempts to prevent operators from making gains from village budgets and levies, but I have found that the operator’s extra “profit” arises in many instances by some operators (God knows how many?) either ignoring or by smoke-and-mirror-misinterpreting legislation (and past Tribunal decisions of relevance) defining what constitutes maintenance and replacement of assets and the operator consequently get its “profit” by simply saving spending their own money when blatantly padding the budget with expense which they should be legally meeting.
There are dozens of Tribunal cases already on record in NSW that will prove that the poor old elderly 24/7 resident has to then take the 9 to 5 operator to the Tribunal and fight the good fight trying to claw back expenditure the operator had misused.
I hope others express their viewpoint to offer on this one Frank & Ernest because to me it’s the crux of what still needs to be sorted out in new legislation while it is allowed to continue as it is. Maybe there are operators out there who can offer a guarantee they don’t dip into residents’ money – please stand up and be counted!! Let’s hear from some.
Neil
Attention Chris Baynes
Chris,
Your opinion piece on village operating costs is completely wrong in regard to WA.
No part of the legislation for Retirement Villages in this state (Act, Regulations and Code) places any limits on increases in the operating budget.
Nor does it provide the residents with any power to approve budgets.
If residents dispute the budget because of an increase in recurrent charges or the imposition of a levy, they can as a group apply to the State Administrative Tribunal for an order (and the Tribunal can make such orders as it sees fit).
Our concerns are related to
• operators misusing the operating budget to meet costs that are their own corporate costs;
• operators using the operating budget for expenses that should be met from reserve (capital maintenance and replacement) funds.
• unsubstantiated management and accounting fees (head office charges).
• sales expenses charged to operating funds including accreditation expenses.
• membership expenses of industry associations.
The facts about the WA legislation should be corrected in your next issue
Des Cousins
Secretary
WA Retirement Villages Residents Association
warvra.org.au
One of the traps in making the decision to enter a retirement village is that if the village is a developing village (which most seem to be), the operator usually funds a deficit on the operating budget. This results in a misleading indicated general services levy in the PID.
Two years ago, the operator declared that our village was a completed village and therefore our levies would rise by 21% as they would no longer fund the deficit. When I pointed out that the PID stated in unambiguous terms that levies could not be increased above CPI without a special resolution by the residents, the answer was “the Retirement Villages Act overrides the PID”. Of course this was a lie, also that we were a completed village as at that very time they were working on a DA for an extension which is now proceeding.
This sort of thing is an example of why many RV residents are unhappy with their decision.
A bit of honesty on the part of operators would not go amiss
Hi ladies,
Very informative indeed, maybe there is light at the end of the tunnel afterall. I’m the much maligned representative of our village, (it’s not advisable to say which one) to WARVRA. Our managing agent are also members, which, incidentally, a lot of residents in general are not happy about as WARVRA was originally set up for residents.
What has been going on here for years is, dare I say, mind blowing! and we are now being asked to cough up a 13.37% inc, so much for CPI. 2014/15 was 27.39%… 2015/16 was 29.42%, and we have done nothing but lost services, we didn’t have much to start with but now we have a lot less and it’s costing much more, it just doesn’t add up at all. In 2002/3 it was $2,893.00, for what we got that was ok but things went berserk! after that and hasn’t stopped
As Des Cousins said, the State Administrative Tribunal is our only hope, but as we were not given due time, as stated in the WARVRA document….bugdets are to be issued at least a month before the meeting, (the end of May) so the residents can peruse, discuss and seek advise on where necessary before the meeting. And if we have any questions for the meeting, we must present them back to them 5 days prior to the meeting, this leaves us with only one week to try to digest and do as we must on this appalling situation. Where do we go next as the bugdet will be passed regadless.
There are a lot of us reliant on the pension so many are perplexed as to just how far this will go, I’m regarded as a troublemaker by management and the Residents Association Inc, who, we thought! are meant to be there for and behind us!
Regards,
Maureen Brunn.
Leedervillle Gardens Retirement Estate.