Retirement Villages Bill

Second Reading

Adjourned debate on second reading.

(Continued from 21 June 2016.)

The Hon. S.G. WADE (15:53): As the shadow minister for ageing, I rise on behalf of the Liberal team to support the second reading of the Retirement Villages Bill 2016. South Australia has led the nation in the development of the retirement village industry. I understand that about 8 per cent of South Australians who are over the age of 65 live in retirement villages, compared with a 5 per cent figure nationally. The majority of accommodation options in a retirement village are independent living units, with only about 7 per cent of units being serviced apartments.

Retirement villages are an important option for people and support active ageing. To try to get a real feel for the role that retirement villages play in empowering people to make choices about their retirement years, I would draw the council's attention to the findings of the McCrindle Baynes Villages Census Report 2013.

The survey found that the top three reasons recent purchasers of retirement village residents gave to leave their previous home was, first, to downsize while they could, and that was about 84 per cent of respondents; secondly, their home was becoming too big to manage (62 per cent of respondents); and the third reason was concern about their future health (60 per cent of respondents). In terms of health, retirement villages proved to be a tonic for many: 46 per cent of residents stated that their mental wellbeing improved after moving from their family home to the village, and 32 per cent of residents said that their physical health had also improved.

Our evidence base is continuing to evolve. Researchers from the Centre for Housing, Urban and Regional Planning at the University of Adelaide, in conjunction with ECH, are undertaking a seven-year study which is based on comparative and annual surveys comparing retirement village residents with people in the community. The McCrindle Baynes report, in contrast, is fundamentally a self-assessment. Amber Watts, one of the researchers from the University of Adelaide study, noted:

People living in the community were more likely to report their health as excellent or very good while ECH residents were more likely to report just good or poor health.

Both groups scored very highly in terms of quality of life indicators, with no significant statistical difference between them. Ms Watts said that, while a perceived social support was high for both groups, ECH residents reported undertaking more social activities more often than community dwelling participants but still perceived themselves to be less socially connected and supported. Ms Watts also said:

We need to start to unpick what is underlying this. I am wondering if perhaps it is something to do with the fact that we have such a high proportion of single people and people who come to us after the death of a partner.

I think that highlights the fundamental challenge of comparing self-assessment with the University of Adelaide work. You need to understand, if you like, what factors lead people into retirement villages in the first place. The fact that people in retirement villages might have a lower state of health may reflect the fact that the reason they are in the village in the first place is that they have a lower state of health. Ms Watts said:

The new ECH residents were [found by the University of Adelaide study] also slightly more likely to report markers of social isolation and loneliness, which was important to monitor longitudinally to determine if that changed after they settled in.

Given that this bill is significantly about consumer protection, I think that it is important to note that the retirement village industry has a good reputation generally. According to the McCrindle Baynes report, 94 per cent of recent purchasers were satisfied that their expectations had been met. Operators seem to be reasonably effective in giving people a fair idea of what retirement living would be like. Only 2 per cent stated that they were not satisfied at all.

Of course, even where expectations are met not all living arrangements work for people. However, 75 per cent of residents reported that they were happy with their decision to move into their village and would make the decision again. On a financial basis, 93 per cent of recent purchasers thought that their decision to move into a village had been a good financial decision. Interestingly, the report does highlight concern about exit fees: 93 per cent of recent purchasers regarded the deferred management fee as unreasonable and 13 per cent stated that they did not understand it. The report explicitly states:

This clearly identifies that new residents are not achieving a clear understanding of the contracts they enter when joining a village—with the consequence that conflict and increased regulation is likely with the increase in consumer advocacy from the upcoming Baby Boomer generation.

Perhaps this bill is something of that consumer advocacy reaction from the baby boomer generation. The Liberal team considers that this bill is to be welcomed if it can support the transparency of transactions, the provision of consistent information and consumer understanding. I think one of the fundamental problems in this regard in terms of promoting consumer understanding is the variety of titles that people are offered within retirement villages.

As I understand it, the main types of arrangements offered are, firstly, strata title or community title; a licence to occupy, where you pay a contribution in the form of an interest-free loan; a leasehold, where you pay a lump sum for a leasehold; and rent, where you pay a periodic payment. So, it may not be easy for people to identify what in fact they are buying. It is very difficult to have a well-functioning market when people can look at a range of products and not be clear what the strengths and benefits are of each. In that regard, the disclosure statement proposed in this bill may be a useful step in promoting community understanding.

Personally—and I am only expressing a personal view rather than a party view—I suspect that the licence to occupy as a product will become less popular over time and that people in the marketplace might be more interested in a community title approach. In reference to the statement from the McCrindle Baynes report, I suspect that the bad experiences of the children of current residents may well undermine confidence in the licence-to-occupy product and that the market may move away from it.

We need to recognise that, unlike the heavily regulated and heavily commonwealth-funded aged-care system, the retirement villages industry is a private sector industry. It relies on private investment by operators and private funding by residents. We need to make sure we balance the interests. A legislative regime which is unfair to either group runs the risk of destroying the industry and fundamentally hurting consumers.

Consumers have rights, but the first amongst them surely is to have their consumption demands met. There is little point in having rights under a contract if there is no provider willing to offer you a contract for the services you seek. We need to make sure that our laws do not discourage entities from providing the services that consumers want, both now and in the future.

I would like to turn now to provide some data on the state of the industry in South Australia. During 2014-15, there were 526 registered retirement villages across the state. Those 526 villages were operated by 149 companies, groups or organisations. The number of registered retirement villages has increased from 459 in 2007-08, which is a 14 per cent increase in seven years. There are 18,093 residences in those 526 retirement villages, with an estimated residency of 25,330 persons. The vast majority of retirement villages offer independent living units only. Only 9 per cent offer serviced apartments.

In terms of the metropolitan-country split, of the 526 retirement villages, I understand that 92 of them are in rural and remote South Australia. In terms of the total number of residences, which is 18,093, my understanding is that there are 2,412 in rural and remote South Australia. That means that 17 per cent of villages are in rural and remote South Australia, with 13.3 per cent of residences. Clearly, the rural and regional supply of retirement village units is significantly below the per capita population, and I think it is very important that this council and this parliament is alert to the potential impact on rural and regional South Australians.

In terms of the non-profit sector mix, I am advised that, of the 526 registered retirement villages, 393 of those are operated by not-for-profit operators and 136 by for-profit operators.That means that 74 per cent of our villages are operated by not-for-profit operators. I think it is very important that the council is aware of that. There are those who would cast this industry as heavily skewed towards the big end of town but, as I will show by further data, this is significantly a not-for-profit industry and it is significantly participated in by relatively small operators.

In terms of industry representation, there are two major representative bodies: the Property Council, and Aged and Community Services. I thank both those organisations for supporting me in getting a better understanding of the industry and the impact that this bill would have on their industry. In terms of residents, the key residents' representative body is the South Australian Retirement Villages Residents Association. Likewise, I thank the office-bearers of that organisation for spending time with me to help me understand the impact on residents.

In terms of the relative mix, the Aged and Community Services organisation represents 55 operators with 333 villages. The Property Council represents 21 operators with 112 villages, and there is some dual membership. Aged and Community Services tends to represent the not-for-profit sector and, as I said, the Property Council tends to represent the for-profit sector.

I think it is important, as we consider this bill, that we appreciate that the not-for-profit sector is more likely to be cash-flow poor and, considering that 74 per cent of the sector is not-for-profit, we need to be alert to the fact that the not-for-profit sector is less likely to be able to cope with changes in the regulatory regime.

I think it is important that we appreciate the diversity of the industry. The minister has kindly provided me with a spreadsheet with the details of operators from which comes the following analysis. There are 164 villages with less than 10 independent living units: that is, 31 per cent of the villages in this state, almost one-third, are small operators. Only 80 of the 526 villages, or 15 per cent, have more than 50 units, and I would call even 50 units a medium-size village, not a large one.

A number of operators operate only one village. Seventy of the 149 operators maintain less than 50 units across all their villages. That means that almost half the operators are small operators, and the small operators are disproportionately not-for-profit and regional. We need to be careful that we do not legislate as though we are just legislating for large cashed-up corporate entities. Some of the elements of this bill particularly threaten small operators and this parliament needs to ensure that we do not drive small and not-for-profit operators out of the market. Less market diversity and less competition are not in the interests of consumers.

Further, I think it is really important that we ensure that we support continued growth in this sector. The 526 registered retirement villages across the state in 2014-15 represent a 14 per cent increase in the number of villages in the seven years from 2007-08. Unlike the honourable member for Heysen in another place, I personally think that we will see continued growth in the retirement village sector as the baby boomers go into the age bracket where such a move is more relevant.

I certainly think the product will change. Operators will need to be more attentive to privacy, services and the fairness of the product, but I am confident that that will happen. This is a competitive market and, if the market does not adjust for those consumer demands, it will not grow. But it is a competitive market and, if it continues to respond to the market, I expect the product will continue to evolve and demand will continue to grow.

We live in the most ageing mainland state. I think one of the issues that we need to be alert to in considering this bill is the number of retirement villages that we may need in the future. We have had a 14 per cent increase in the last seven years. What might we need in the future, and will this legislation help or hinder achieving that goal?

The latest ABS population projections I could find indicate that in 2016, 290,000 South Australians were over the age of 70. Most people enter retirement villages in their 70s. In 10 years, the number of South Australians over the age of 70 will rise to 282,000—that is a 35 per cent growth in 10 years. If we have had a 14 per cent growth in retirement village units in the last seven years and we are expecting a 35 per cent growth in the cohort that is most likely to want retirement villages, we need to not just maintain the current rate of growth, but increase it.

In 20 years, there will be 347,000 South Australians over the age of 70; that is a growth of 66 per cent. On the basis of 8 per cent of people over 70 living in retirement villages and about 1.4 residents per residence, we would need over 7,730 more retirement village residences in the next 20 years. That is a 43 per cent increase in the supply of retirement village residences in the next 20 years. We as a parliament need to make sure that we are not only mindful of the needs of current residents but also the needs of future residents.

A key risk for future residents is that changes to the sector could curtail the supply of units at the very time they need us to significantly increase supply. I may need to declare an interest: by 2036, God willing, I will be in my 70s. I may be one of those purchasers looking for a unit. I and 347,000 other South Australians will not thank this parliament if insensitive reform now means that there is a shortage of retirement village units available to us in the future and we do not at least have the range of options that we have now.

In that context, I am very disturbed at the lack of a regulatory impact statement or a cost-benefit analysis in relation to this bill. How do we know what the impact will be on rural and regional retirement villages, on small or not-for-profit operators, on current residents or on future residents? We cannot and should not be legislating in such an important area without basic information such as this.

I turn now to the bill before us. The Retirement Villages Act was enacted in 1987 and reviewed by a select committee in 2013. In early 2015, the government released a draft amendment bill. An eight-week public consultation on the bill attracted more than 300 submissions. The most contentious provision in the bill is clause 26, which requires an operator to pay a resident their exit entitlement if, after 18 months after ceasing to reside in the village or giving notice of same, their interest in the village is not sold.

The key provision relates to addressing the mischief of older South Australians wanting to leave their retirement village residence but being unable to access their exit entitlement until their interest has been sold. Significantly, the statutory repayment provision was not recommended by the select committee. The 2015 consultation draft bill proposed a 12-month statutory repayment provision. The provision offends the principle against retrospectivity of laws and the principle that the state should allow private parties to contract freely.

Of course, the principle against retrospectivity is not absolute. The benefit may outweigh the cost, but as I already stated, it is very important to assess the benefit and the cost. Our ability to assess that in this context is severely undermined by the lack of a regulatory impact statement and a cost-benefit analysis. The statutory buyback runs the risk of undermining the viability of current operators and discouraging future investment. Future potential residents of retirement villages may well pay the price if a statutory buyback is not properly designed.

In my view, the government has been reckless in its failure to undertake a regulatory impact statement and a cost-benefit analysis. The opposition is not in a position to do either of these pieces of work and, in the absence of this information, the opposition put a significant number of questions to the government and requests for documents.

In that regard I thank the minister and her office for the briefings that I and other Liberal members have received, and in particular the answers to the information requests that I put to her. She provided significant responses which I would like to read onto the record now. There were some omissions which I would like to highlight as I go through the questions and answers, and also some other matters that seem to have slipped through the net. As I said, I would now like to read the responses provided to me by the Minister for Ageing in relation to a series of questions on the Retirement Villages Bill 2016.

I asked, in relation to 'special resolution' on page 7 of the bill: will the government be putting in an amendment to clarify that where the act says the resolution must have been passed by a majority of not less than three-quarters of the number of residents, it is referring to households rather than individual residents? The answer is:

No, the term 'residence' is a defined term and consistently used throughout the Bill. Section 32 deals with the proceedings at meetings, and specifies that where 2 or more people occupy the same residence only 1 may exercise a vote. This is to ensure that a single resident has the same voting right as a couple.

I asked the minister: what proportion of retirement village residents leave by transferring to an aged care facility or another village? The answer was:

Unknown. Retirement village operators are not required to notify the Department of vacancies occurring or the reasons a resident may leave.

Operators have not been willing to provide this information when approached.

I asked the minister: what is the average time that a retirement village resident lives in a unit? The answer given was:

Unknown. Although the PwC/Property Council 2015 retirement census states, on average in Australia, 'the average length of stay of residents currently in the village is 7 years'. There is a scarcity of data available about much of the industry and its residents. While the individual peak bodies have commenced collecting some data from their member villages across Australia, much of their findings are not shared.

There is no data which is South Australian specific and incorporates the variety of retirement housing available. The Office for the Ageing has engaged the University of Adelaide to undertake a census of all residents and operators of South Australian villages in late 2016 to fill the gap and contribute to knowledge generally about the ageing population.

I asked the minister: how many complaints were made to the Office for the Ageing last year or to the registrar? How many of those complaints related to retirement villages, and how does that compare with other retirement accommodation types? The answer I was given was:

There were 198 formal requests for assistance by residents and operators received by the Office for the Ageing from 30 June 2013 to 1 July 2015. This does not include…inquiries OFTA receives on a daily basis or matters where no action can be taken.

There were 94 requests for assistance, or 47%, relating to remarketing, exit fees and repayment of a premium. It is estimated that 36 or 18% of matters would have benefitted from the proposed repayment measures.

OFTA notes that many of these matters do not end up before the Tribunal for resolution as there is generally no recourse or action for a resident or for any representative in relation to accountable remarketing practices, or to require repayment of the exit entitlement.

OFTA has commissioned a client management system which will commence in July 2016, providing greater reporting opportunities on complaint types and trends.

I asked the minister another question which was in relation to the registrar's obligations: how independent is the registrar from the minister considering that the registrar is appointed by the minister? Can the minister, for example, instruct the registrar to classify something as confidential and not liable for disclosure under the FOI act under subclause (3). The answer I was given was:

The Registrar is an employee of the Public Service appointed by the Minister and must abide with the Code of Conduct in the Public Sector Act 2009. This includes the Code of Ethics and Values and Professional Conduct Standards.

The Registrar has an obligation to preserve the confidentiality of certain information if it could affect the competitive position of the operator or some other person, or is commercially sensitive for some other reason. Advice is sought on an individual basis from the Crown Solicitor's Office.

That is the end of the answer. I would like to ask the minister if I could have an answer to the original question. I appreciate the minister kindly answered the specific issue in relation to confidentiality, but I would like a more direct response to the issue of the registrar's obligations. How independent is the registrar of the minister, considering the registrar is appointed by the minister? I also asked the minister: does the bill apply to state government-owned entities? The answer I was given was, 'Yes, it does.' I asked the minister: will the definition of 'domestic partner' in the Family Relationships Act apply to people living in retirement villages? The answer I was given was:

Yes the definition in the Family Relationships Act will apply. The purpose of the definition is to provide clarity to incorporate the relationships of people who may live in a village which do not fit the classification of spouse (which is legally married). This is a standard definition used in the legislation to capture these relationships.

I asked the minister: why is this legislation retrospective, not just prospective? The answer I was given was:

The introduction of a prospective only statutory repayment period would not assist existing residents or those who have already left a village with no reasonable prospect of receiving their repayment. OFTA is aware of instances where residents have waited up to 5 years or longer for a residence to be relicensed and repayment of funds to occur.

Feedback was provided from residents and their estates through consultation that it was unfair that a resident was required to provide what is often described as an 'interest-free loan' in their residence contracts with no provision relating to when this money would be repaid to them. This imbalance is more pronounced when coupled with the fact that the operator often is solely responsible for relicensing the residence.

The next two couplets of questions and answers relate to clause 26. With all due respect to the minister, the information provided is interesting, but neither cluster addresses the questions. What I propose to do is to read on to the record each set of questions, hoping that the minister in this place might be able to provide a more direct answer. In relation to clause 26, I asked the following questions:

1. What protections are in place for small operators?

2. Has any analysis been done on the particular impacts on the regions—regional areas, metropolitan areas, inner suburbs, outer suburbs and low socio-economic areas?

3. What impact is there to be on the ability of small to medium operators to borrow money from banks?

4. Has the government undertaken a valuation impact statement of the proposed buyback scheme?

After that cluster of questions, the minister provides the following answer:

The Bill provides that operators who face legitimate difficulties in repaying a resident their exit entitlement at 18 months are able to seek an extension of this period through SACAT.

Of the 92 villages operating in regional SA, 60 repay within 12 months or less, 2 within 2 years and the others upon relicensing. (7 state that whilst their contract provides for repayment or relicensing, in practice they repay within 12 months or less).

There is a 5 year review period of the statutory repayment provisions built into the Bill. This will provide an opportunity to assess any impacts of the clause and to ensure that the application of the statutory repayment period has achieved the desired outcomes.

That is the end of the answer. I just pause to reiterate my original questions, because it is about assessing the impact of a bill before you legislate it, not looking back after five years and seeing how much damage you have done to the industry.

The second cluster of questions in relation to clause 26 was, firstly, how does the bill guard against operators being under pressure to sell by the buyback and selling at a suboptimal price? Secondly, could rushed sales affect the value of other residences of the villages? Thirdly, is there a risk that operators will contract to take a larger share of the capital gain of a unit if a buyback arrangement is in place? The answer given was:

Residents can elect not to receive payment at 18 months and await repayment based on the actual relicensing of the unit.

The market will dictate what retirement village offering will be accepted—there are existing villages which offer no capital gain to the resident but guaranteed repayment of their buy in price when they leave, others that share capital gain and provide a time of repayment and many variations in between. The disclosure statement will enable a prospective resident to shop around, understanding the fees and charges and terms on offer, and ultimately choose an offering that best suits them.

That is the end of the answer. Whilst I appreciate the minister's response, it does tend to focus on the information available when you are going into the residence, rather than some of the issues I was trying to raise in terms of what will be the impact on the market when, as people are exiting, there are potential statutory buyback impacts on the value of properties.

Moving beyond clause 26, I asked the minister: is there a move to compel owner-operators to become licensed real estate agents, or has the government considered owner-operators having to either appoint an agent of their own or from a panel of agents? The answer I was given was no. I asked the minister: has the government considered having a panel of agents who could be then used by residents as well if they are seeking to have a second opinion or another view? The answer I was given was:

No. If there is a dispute as to value of a village residence, an independent valuer can be appointed. There are specialist valuers in aged care and retirement housing. In past disputes the SACAT has ordered that the Australian Property Institute appoint a valuer.

I asked the minister: can you, perhaps between the houses, see if you can get some estimation of how many people transfer each year and the economic impact of that? The minister's answer was that the information is not available.

I asked the minister for a list of state government-owned retirement villages, including any within public hospitals. I thank the minister for providing me with that list. By way of summary, the list shows that there are seven retirement villages in rural areas owned and operated by Country Health SA Local Health Network. I asked the minister for a list of local government-owned retirement villages, including any within community hospitals. The minister kindly provided me with a list and it shows, in summary, that local government operates 22 retirement villages in both rural and metropolitan locations.

As I said, I certainly thank the minister for the information provided in response to those questions. I would just like to reiterate a few questions that perhaps got missed in the flow. Firstly, I asked for a copy of the regulation impact statement that was referred to in the other place on 24 May 2016. I surmise from the fact that it has not been provided, and from other comments, that perhaps it has not been done.

I also sought a copy of the core logic analysis and I would like to reiterate that request. I asked for a copy of the advice given by SACAT, including any advice on the interpretation of clause 26(7). That advice was referred to in the other place on 25 May 2016. I asked for a copy of the submissions and advice received by the government from the banking industry on the original bill. That advice was referred to in the other place on 25 May.

In conclusion, I would indicate that, considering the government foreshadowed amendments on 24 May that are yet to be tabled, we are certainly keen to see what further amendments the government may be proposing to its own bill. I would indicate, on behalf of the opposition, that we are actively considering amendments of our own, and are keen to speak to other members, the government and stakeholders (both residents and operators) about how we can make this bill a better bill.

The Hon. K.L. VINCENT (16:39): I indicate that Dignity for Disability is happy to support the second reading of this bill. We thank the minister for the briefing on the bill that was provided to my office. We would also like to thank the various stakeholders who have written to us or otherwise been in touch with us about this bill: the Council on the Ageing (COTA); Aged and Community Services SA and NT; SARVRA, the South Australian Retirement Villages Residents Association; and others.

We do have concerns about, one, the length of the statutory repayment period being 18 months rather than 12 months, as I understand was originally drafted, as COTA has raised. If the government could explain why the period of time has been changed, that would be appreciated, given the obvious significant amount of concern. There is also SARVRA's concern regarding section 29, dealing with the move of a resident to an aged-care facility. I understand that the bill currently requires operators to pay a daily accommodation payment (DAP) to enable residents to secure their aged-care place. I understand that if their unit is not relicensed for 18 months, the resident will lose a substantial amount of their exit entitlement, reducing their capacity to use the refundable accommodation deposit (RAD) option if they have no other access to cash for the RAD.

I know that SAVRA also has a request before the parliament that we insert a clause to reflect the particular circumstances of their occupancy, since residents do not own their own homes in a retirement village but rather have a licence to occupy that home. Dignity for Disability also notes the points that COTA has made, both that the quality of regulations that are developed are important once the act has passed and that the manner in which the tribunal interprets the new act will have a significant operational impact. Any advice that the responsible minister could give on those points would be gladly received as well. With those brief words and hoping for some more clarity, I can indicate that at this stage we are happy to support the second reading of the bill.

Debate adjourned on motion of Hon. T.J. Stephens.