Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 87

Retirement communities come in different shapes and sizes

Last month, we looked at granny flat rights and examined the different legal and financial arrangements that people enter into when the need for aged care arises. This article examines retirement communities – retirement villages (RVs) and demountable home parks (DHPs).

Demountable home parks (also known as manufactured home parks)

DHPs are generally classified into two groups: those that originated from caravan parks for tourist accommodation and also offer permanent sites (often in a distinct area) and those that are purpose-built villages or communities marketed to retirees. While they operate under Caravan Park and Demountable Home Park legislation, they are often called things like ‘Over 55’s Community’, ‘Retirement Resort’ or ‘Lifestyle Village’.

DHPs built for the retiree market have the look and feel of a bricks and mortar retirement village with communal facilities such as swimming pools, bowling greens, tennis courts etc. They normally have bigger units, with the majority being two- or three-bedroom units and very few single-bedroom units. The units themselves can be hard to pick as demountable, particularly when there is a garden surrounding them and they come with all the ‘mod cons’.

The key difference between a DHP and a RV is that the loan, licence or lease arrangement is over the land, not the building. This poses a unique set of circumstances for people living in these communities making residents both a homeowner and a tenant at the same time. Traditionally, there have been no entry or exit fees, however, some of the new communities do charge an exit fee.

Commonwealth rent assistance and DHPs

Due to the nature of ownership within a DHP, i.e. you own the home but rent the land (often called ‘site fees’), rent assistance is often payable to residents of these communities who are pensioners.

Here’s how the rent assistance is calculated:

Firstly, the rent (site fees) must be above the minimum threshold for rent assistance to be payable. The minimum thresholds are: $113.20 per fortnight for singles and $184.20 for couples (different thresholds apply to couples separated due to illness or share arrangements). Rent assistance is paid at 75% of the rent above this threshold, up to the maximum of $127.60 per fortnight for singles and $120 for couples.

For example, Shirley is a full age pensioner living in an Over 55’s Community. She pays site fees of $120 per week to the community manager. Her rent assistance will be calculated as:

Rent paid $240 per fortnight (pfn)
minus threshold $113.20 pfn
excess $126.80
x 75% = $95.10

Shirley’s rent assistance would be $95.10 pfn. For Shirley to receive the maximum rent assistance of $127.60 pfn her rent would need to be at least $283 pfn.

One of the main concerns for residents of DHPs is increases in site fees (rent). The leases offered vary from one to the next and one resident to another. While the lease will indicate the rate at which the rent will be increased during the period of the lease (e.g. CPI) for those with shorter leases their expiry can bring uncertainty about the affordability of the new lease.

Retirement villages

RVs operate under the relevant state or territory legislation which typically sets a minimum age of 55. This legislation generally provides a definition of what is and isn’t considered to be an RV, sets out what legal documents (including disclosures) are required to be provided to residents by the village operator, regulates some (not all) financial arrangements and provides framework for the resolution of disputes.

There are many different forms of ownership with RVs, including freehold or strata title, company title, leasehold, licence and some operate under a rental model. The most common ownership model is a 99-year (or lifetime) leasehold or licence.

The costs associated with living in a RV can be summarised as: the entry cost, the ongoing cost and the exit cost.

1. Entry cost – This is the price paid to gain possession of the unit. This will be either the purchase price if it is strata or company title, or the amount of the interest-free loan you make to the developer if it is a lease or licence arrangement. The amount you pay determines if Centrelink or the Department of Veteran Affairs consider you to be a homeowner, whether the amount is an assessable asset and your entitlement to rent assistance. Consideration also needs to be given to the impact on pension entitlement itself.

2. Service charges – Irrespective of the method of title held, residents are responsible for the ongoing costs of the village. These include insurance, water rates, general lighting, staff wages, and repairs and maintenance. Of course residents are also responsible for the internal maintenance of their unit, their own utilities and insurance of their personal effects.

Many villages also require outgoing residents to pay the cost of refurbishment of the unit and this will be part of the calculation of the departure fee.

3. Deferred management fee (DMF) – This is the cost that causes the most confusion. There are a number of different ways in which the DMF can be calculated, and in some cases the retirement village operator will give a choice of models. In looking at the models it is important to understand if the DMF will be calculated using the purchase price or the sale price and whether it will be before or after any capital gain sharing.

Availability of care services

The amount of care that can be provided in an RV or DHP will vary from one to another. Traditional retirement communities focus on the lifestyle and activities and want to attract residents that are sociable and physically active. These communities may require that you leave if your health deteriorates as too many people unable to participate or remaining in their units can have a detrimental effect on the experience of the other residents as well as the ability to sell units to new residents. In some circumstances the manager will allow you to have care provided to you in your unit. The manager may organise this for you or leave it up to you to arrange, just as you would in your own home.

At the other end of the scale there are retirement communities that are purpose-built to deliver care. Where it is a condition of entry that you require care the manager will generally assess your needs prior to you moving in to ensure that they can provide the services you need. They will generally co-ordinate the package of services for you and provide you with a price table to help you understand what the cost will be now and what you can expect if your care needs increase. In many cases the care being provided will be through a government-funded care package with the delivery of ‘top up’ services by staff or through private contractors.

Living in a retirement community can provide the company of like-minded people while having access to care and other services that maintain independence. Understanding the legal and financial aspects as well as the ability to have access to care if needed is vitally important.

Rachel Lane is the Principal of Aged Care Gurus and oversees a national network of financial advisers dedicated to providing quality advice to older Australians and their families. Read more about retirement villages and demountable home parks in the book “Aged Care, Who Cares; Where, How and How Much” by Rachel Lane and Noel Whittaker. This article is for general educational purposes and does not address anyone’s specific needs.

 


 

Leave a Comment:

RELATED ARTICLES

Family home no longer the sacred cow

Providing financial assistance to parents

Don’t have retirement village regrets

banner

Most viewed in recent weeks

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Australian house price speculators: What were you thinking?

Australian housing’s 50-year boom was driven by falling rates and rising borrowing power — not rent or yield. With those drivers exhausted, future returns must reconcile with economic fundamentals. Are we ready?

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

Latest Updates

Shares

Why the ASX may be more expensive than the US market

On every valuation metric, the US appears significantly more expensive than Australia. However, American companies are also much more profitable than ours, which means the ASX may be more overvalued than most think.

Economy

No one holds the government to account on spending

Government spending is out of control and there's little sign that Labor will curb it. We need enforceable rules on spending and an empowered budget office to ensure governments act responsibly with taxpayers money.

Retirement

Why a traditional retirement may be pushed back 25 years

The idea of stopping work during your sixties is a man-made concept from another age. In a world where many jobs are knowledge based and can be done from anywhere, it may no longer make much sense at all.

Shares

The quiet winners of AI competition

The tech giants are in a money-throwing contest to secure AI supremacy and may fall short of high investor expectations. The companies supplying this arms race could offer a more attractive way to play AI adoption.

Preparing for aged care

Whether for yourself or a family member, it’s never too early to start thinking about aged care. This looks at the best ways to plan ahead, as well as the changes coming to aged care from November 1 this year.

Infrastructure

Renewable energy investment: gloom or boom?

ESG investing has fallen out of favour with many investors, and Trump's anti-green policies haven't helped. Yet, renewables investment is still surging, which could prove a boon for infrastructure companies.

Investing

The enduring wisdom of John Bogle in five quotes

From buying the whole market to controlling emotions, John Bogle’s legendary advice reminds investors that patience, discipline, and low costs are the keys to investment success in any market environment.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.