Queensland residents association gets to the core of its problem with the Deferred Management Fee supported by research
The QLD residents association, the ARQRV, has pitched to the Minister of Housing the major driver of resident discontent. President Les Armstrong has written: In other industries, such as consumer finance, exit fees are being banned or...
The QLD residents association, the ARQRV, has pitched to the Minister of Housing the major driver of resident discontent. President Les Armstrong has written:
In other industries, such as consumer finance, exit fees are being banned or restricted because they limit competition and disempower consumers. However exit fees can never sensibly be prohibited in the retirement village sector because they are the major source of profit for the village Operator, who has generally invested significant capital in establishing the village.
Instead, in the retirement village sector, two things are required:
(1) Formal recognition by Government of the significant imbalance in bargaining power between Operators and residents as a result of the business model based on exit charges; and
(2) Implementation of measures that boost the Operators duty to act in the interests of its residents, and which empower residents to the extent necessary to offset the impact of the exit charges.
Done properly, these steps will not significantly increase costs for village operators but will greatly improve consumer confidence in retirement villages. The decision to buy in and commit to the exit charges will be far easier, with significantly less risk of an adverse outcome. This in turn will do much to secure the future viability of the Industry.
His argument is backed up by our McCrindle Baynes survey of 10,600 residents which identified that XX% of residents were struggling with the cost of weekly fees when they joined a village and this figure rose to XX% by the time of the survey. (See chart).
Their dilemma is that they now cant afford the fees but they cant leave the village either because the DMF will reduce their capital, meaning they cant afford a home outside of the village. Thus the regularly used word trapped applies together with ongoing angst when weekly fees increase.
The argument therefore is not whether the DMF is fair or a good or bad thing, but rather whether the sector should be ensuring the prospect resident can financially afford to be part of the village over the longer term. If not, then it would be in everybodys interest to dissuade them form joining.
To see a video of Les Armstrong explaining the village proposition, click here:
