$1 billion retirement village buyback plan sparks backlash

Retirement village buybacks have become an election issue in New Zealand ahead of November’s poll.

The Opposition Labour Party has promised to introduce mandatory three-month buybacks if elected, requiring operators to repay departing residents regardless of whether their unit has been resold. Labour says residents and their families should not have to wait months or even years to receive money tied up in village contracts.

The issue was thrust into the spotlight during a public meeting in Auckland, where one woman described the current system as “utterly immoral”, saying her 97-year-old father’s estate was still waiting to receive his money.

Under Opposition Labour MP Ingrid Leary’s proposed legislation, residents would be repaid within three months regardless of whether their unit had been resold. Families would also receive 10% of the resident’s entitlement within five working days to help cover immediate expenses such as funeral costs.

Industry pushes back

The Retirement Villages Association says it agrees lengthy repayment delays need to end but believes three months is unrealistic.

Executive Director Michelle Palmer said the industry supports the New Zealand Government’s proposal to introduce a 12-month maximum repayment period.

“It takes more than three months to prepare, market and sell a home,” Ms Palmer said.

She said a three-month deadline would require operators to find more than $1 billion in additional capital at a time when villages are already facing higher development costs.

Those concerns are reflected in research by Grant Thornton, which found retirement village developments typically take between 21 and 25 years to reach breakeven.

Former Labour minister Michael Wood, who organised the public meeting as he campaigns to return to Parliament, said retirement village residents deserve stronger consumer protections.

“There isn’t any other area in consumer law where a business has an indefinite right to keep hold of your money,” he said.

He added the proposal includes exemptions where mandatory repayments would create serious financial pressure for an operator.

Australia settled on 12 months

The debate differs from Australia, where 12-month buyback requirements are now standard.

While the legislation varies between the different States and Territories, operators are generally required to repay former residents within 12 months, even if a unit has not been resold.

New Zealand’s Opposition wants to go much further.