Retirement Villages – looking at their economic impact

On 25th July, at an event in the Beehive, the Retirement Villages Association (RVA) launched a report commissioned through Price Waterhouse Coopers Consulting (PWC), entitled Retirement village contribution to housing, employment, and GDP in New Zealand. Your blogger was there; see below, with Pete Matcham from Grey Power and Mike Reid from Local Government New Zealand.

The purpose of the report (available at https://www.retirementvillages.org.nz/) is to estimate the size of the retirement village industry in New Zealand and consider its contribution to the national economy. It does not quantify the social or health benefits of retirement village living for residents (a report on this may come later).

Nevertheless the results are impressive and significant for policy. According to the Registrar for Retirement Villages (part of the Ministry of Business, Innovation, and Employment) there are approximately 400 retirement villages in New Zealand. The 2016 figures show that there were 32,835 retirement village units, including 5,516 own-your-own (which are not part of the RVA database[1]). This includes independent living units and serviced apartments. The average number of units per village is 75, but their size varies from 10 or fewer units to more than 250. Some 15,000 new units are planned for the next 7-8 years.

The growth in the retirement village industry has been rapid. Between 2009 and 2016 the number of units (license to occupy and own-your-own) grew by 53%.

How does this growth relate to population ageing?

The report uses the 75 plus age group as its target market, although the minimum age for entry can be lower, depending on the village.  It presents figures to show that the percentage growth in retirement village units has outpaced the percentage growth in the 75+ age group. The increasing “penetration rates” (percentage of a population group who currently live in retirement villages) show the increasing demand for RV units. Between 2012 and 2017 the penetration rate has increased from 9.4% to 12.6%.

How do RVs help with housing supply?

A key message from the RVA report is that villages help to “ease demand on the residential housing market……. assisting with the housing supply shortage”. The current build rate of retirement villages is faster than the overall level of housing stock growth. “As new village units are constructed, this opens up the broader housing market and frees up larger homes for purchase or rent by families as older people move on”.

Other ways of alleviating housing shortages include increased land use intensity and higher housing density. Retirement villages do better in this area compared with other housing developments, especially mid to large-sized retirement villages in large centres, notably Auckland. The higher price of land in Auckland provides an incentive to build at higher densities. Some of the larger Auckland-based retirement villages have up to six storeys. This can free up land for redevelopment, building multi-bedroom family homes, where previously there were only single occupants.

How do RVs create employment?

The report estimates that the retirement village sector employs approximately 19,000 people to support day-to-day operations. “On average, for every 100 retirement village units, there are 64 staff to support operations”. “Retirement villages create jobs in food preparation, laundry, cleaning services, repairs and maintenance, activities coordination, transport and travel, and business management”. “By 2023, approximately 29,000 people will be directly employed by retirement villages in New Zealand to support their day-to-day operations”. In addition, thousands of jobs are supported through the construction of new villages.

How do RVs contribute to the economy?

Using data from the RVA, PWC estimate that day-to-day operations in the retirement village sector add around $1.1 billion to New Zealand’s GDP per annum, accounting for roughly 0.4% of national GDP. Given the forecast retirement village construction plans they will contribute $480 million value added every year.

An example of the value added impact of a 250 unit retirement village brings the report’s conclusions into perspective (p.29). It may contribute $21.4 million directly to the economy:

  • $4.8 million in engineering, quantity surveying, architectural, and other technical and business professional services;
  • $13.9 million in building and other trades, building management, building materials supply, subdivision and site preparation;
  • $1.8 million in civil works including site drainage and road construction;
  • $0.9 million in furniture, fittings, and equipment retailing and installation.

For a long time there have been calls (including mine) for a greater variety of housing options for older people. Retirement villages are clearly a significant addition to the housing sector in New Zealand and innovative approaches are being developed, including rental and “affordable” (lower capital required starts) units in villages.

[1] The RVA represents more than 95% of the retirement village industry by unit number. The data in the report relate to 213 villages. In New Zealand 81% of villages are owned by companies and 19% are not-for-profit. The comparable figures for Australia are 64% and 36%, respectively.

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About Age Concern New Zealand 'on research'

At the heart of everything Age Concern does is a passion to see older people experience well-being, respect, dignity, and to be included and valued. We support, inform and advise older people on issues such as access to health care, transport, housing, financial entitlements, and social opportunities. We also work to combat real problems in our society, like elder abuse and neglect, chronic loneliness and social isolation. We provide specialist services with trained and qualified professionals able to give expert advice and assistance. Age Concern is a charity and relies on the support of volunteers and public donations to do much of the work we do. To help us help older people, please consider making a donation of your time or money. To see how, visit www.ageconcern.org.nz
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One Response to Retirement Villages – looking at their economic impact

  1. Dianna says:

    I’ve often thought that the government should subsidise people moving into villages so that family homes are freed up for families to buy.

    Like

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