Aged care providers still cautious despite $3B boost
Providers say accommodation reforms still fall short
- Step forward: Providers welcomed new subsidies and low-interest financing proposals
- Investment gap: Operators say the economics of new aged care builds still do not stack up
- Costs rising: Construction inflation remains the biggest barrier to large-scale development
- Budget focus: Attention now turns to the Federal Budget for further reform details
Aged care providers say the Government’s response to the Accommodation Review is a step forward.
However, they state, the reaction to the review is not enough to trigger the wave of new residential aged care development that Australia urgently needs.
While operators have welcomed new capital subsidies, low-interest financing proposals and increases to the Accommodation Supplement, there is growing concern across the sector that the fundamental barriers to investment remain unresolved.
The Independent Review of Residential Aged Care Accommodation Pricing – released on 23 April –warned Australia needs around 10,600 new aged care places every year for the next two decades – effectively a new home every three days, a line Federal Health and Aged Care Minister Mark Butler has repeatedly highlighted – to keep pace with demand.
But providers say the economics of building still do not stack up – despite the Government’s $3 billion aged care announcement last month.
Supported residents still under pressure
Uniting NSW.ACT CEO Tracey Burton has told The Weekly SOURCE the Government’s capital commitment “is not unhelpful” but warned it would not significantly change investment appetite without broader operational funding reform.
“What’s critical right now is releasing more Home Care Packages to prevent entry into residential aged care and increasing RAC operational funding, including the accommodation supplement for those without means,” she said.
Tracey said providers with higher proportions of supported residents, such as Uniting NSW.ACT, continued to carry a disproportionate burden under the current model.
“We have been calling for the Residential Aged Care Accommodation Supplement to increase to $150 a day,” she said.
“The proposed rates fall far short of the real cost of delivery, risking that people without means will be unable to access residential aged care.”
She also criticised proposals within the Review that would effectively lock providers into their existing supported resident mix for three years.
“For the system to be balanced and fair, all operators need to play a role in providing supported accommodation places, and their contribution should be measured at a provider level, not home by home,” she said.
“The Accommodation Pricing Review proposals do not address this imbalance.”
“Until these settings are corrected it doesn’t unlock the investment in new or refurbishment projects that are needed as our population ages.”
Construction costs still biting
Amana Living CEO Stephanie Buckland said the reforms were positive, particularly for providers supporting lower-means residents, but warned construction costs remained the dominant issue.
“Additional funding and access to low interest capital are positive steps,” she told The SOURCE.
“Measures such as targeted capital subsidies and improvements to the accommodation supplement will help business cases stack up more readily.”
But she said providers were still unlikely to rush into large-scale greenfield developments.
“Construction costs continue to escalate rapidly, and in Perth where Amana Living operates, they remain the single biggest constraint on greenfield projects,” she said.
“Even with improved capital settings, the gap between build costs and sustainable returns is still challenging.”
Stephanie said providers still needed greater long-term certainty around accommodation revenue settings, including Refundable Accommodation Deposits, alongside confidence funding would keep pace with inflation over the life of a project.
“Without those levers moving in tandem, most providers are likely to remain cautious, focusing on refurbishment or incremental expansion rather than large-scale new builds,” she said.
Budget now the next test
In short, the Government has acknowledged the aged care supply problem, but for many providers, the underlying financial settings are still not delivering the confidence that they need to build at scale – a point reinforced by Bolton Clarke Group CEO Olivier Chretien in the latest issue of SATURDAY.
Attention now turns to next Tuesday’s Federal Budget on 12 May, where the sector is waiting to see the details behind what the Government is prepared to commit to the Accommodation Review recommendations.
