A nasty surprise is about to hit these retirees

Residents in retirement communities could be in for a nasty surprise with councils across the country looking to change the way rates are levied.

Currently, retirement villages and land lease communities are charged council rates based on the whole parcel of land. However, the changes would see rates levied on each individual home or apartment. In dollar terms it could see an 800 per cent increase in what residents pay.

A range of new rate hikes on retirement villages may help councils raise revenue, but they could seriously affect poorer residents.Credit: Nic Walker

In a retirement village, residents typically pay council rates as part of the ongoing fee, often called a general service charge or recurrent charge. The fee works on a cost-recovery basis with each village having a budget of expenses for running the village and maintaining the amenities. The cost is then apportioned based on the size of your home or the number of occupants.

In The Parks Retirement Village in Cairns there are 157 villas and apartments housing 191 residents. The village roads, footpaths and amenities have been built by the village and maintaining them, as well as arranging for rubbish disposal, is paid for by the residents.

The change would see residents paying an extra $75 per month for rates. The majority of residents are pensioners so an extra $900 per year would put significant pressure on their finances while offering no relief through the provision of extra maintenance or services to the village.

In land lease communities, residents pay “site fees”, which is rent for the land their home sits on, and use of the amenities. Site fees are set by the operator, they don’t need resident approval, and operators can (and do) make a profit from them.

These new rate hikes risk are seen not as fair reform, but a cash grab.

While land lease communities often advertise “no council rates”, the reality is that they are an operating expense so it is fair to assume that they are being paid (together with other expenses) from the site fees while operators maintain a margin for profit. Much like retirement villages, land lease communities pay for the construction and maintenance of roads and buildings.

From council’s point of view the cost of maintaining sports facilities, libraries and providing services such as rubbish collection are increasing, so they are looking for sources of income.

The change in rates for The Parks Retirement Village would provide the council with an additional $141,000 per year in revenue. That’s just one village. When you multiply it out across the 2500 retirement communities across Australia, it’s hundreds of millions of dollars.

Charging retirement communities the same council rates as traditional residential developments overlooks some key differences, starting with land ownership. In most retirement villages, residents don’t own the land – they have a leasehold or licence contract. In land lease communities, residents own their homes, but not the land.

The changes also ignore the significant investment these communities make in their own infrastructure. Residents often fund the construction and maintenance of roads, amenities, and recreational facilities – some of which are even shared with the broader community.

Any proposal to increase council rates for retirement community residents needs to reflect these realities. That means considering the land ownership structure, the resident-funded services within the communities, and the lower demand placed on council resources.

Without this context, a rate hike risks being seen not as fair reform, but a cash grab.

Rachel Lane is the author of Downsizing Made Simple, a book and website aimed at demystifying downsizing.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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