Australia is entering a strange moment in aged care, demand is rising, expectations are rising, the new Aged Care Act is raising the bar, and yet the number of new residential aged care homes being built has almost evaporated. Anyone looking in from the outside might assume providers have lost their appetite for building, but the opposite is true. For organisations like St Andrew’s, the willingness is absolutely there. The problem is not appetite, it is the conditions in which that appetite must operate.
Recent commentary from Catholic Health Australia captured something providers have been saying quietly for years. The accommodation supplement, the key funding mechanism for residents of low means, no longer comes close to covering what it actually costs to build, maintain, and renew a contemporary aged care room. In many cases, especially in regional settings, it covers less than half. When the core funding mechanism falls so far behind reality, every new project begins life with a structural imbalance.
This funding gap is only one part of a much larger problem. The Pride Aged Living submission to the Government’s Pricing Review sets out, in uncomfortably clear detail, how the current rules make it almost impossible for providers to plan capital responsibly. It describes a system in which residents, not providers, determine whether to pay a RAD or DAP, leaving organisations unable to manage their balance sheets. Supported residents, who should be subsidised by government, end up subsidised by self funded residents instead. RAD caps, liquidity requirements, and the restrictions on permitted use create a capital environment that few investors would consider stable or predictable. All of this makes new development difficult to justify, even for not for profit operators whose motivations are service and community rather than commercial return.
In regional areas like the Northern Rivers, where St Andrew’s operates, these pressures intensify. Construction costs are higher, workforce shortages are deeper, economies of scale are smaller, and land availability is tighter. Yet regional providers often achieve stronger quality outcomes than their metropolitan counterparts, a paradox that reveals how hard regional organisations work to compensate for structural disadvantage. But even the most committed provider cannot build a new home when the numbers simply do not add up.
Land adds another layer of difficulty. Even if funding were improved tomorrow, providers would still struggle to secure land that is appropriately zoned, large enough, close to services, and affordable. For us, the difference between a viable RACF concept and a stalled idea is often nothing more than the availability of land under long term lease or in partnership with a public or private land holder. The willingness exists, the capability exists, the planning expertise exists, but the geography blocks the way.
We now have an opportunity to reset the economic foundations of residential aged care so that providers can once again invest with confidence. Pride Aged Living is calling for a complete rethink of capital flows into the sector, including the need to allow investment models that are standard in almost every other property based industry. These reforms are not about luxury or profit, they are about whether Australia can build the homes older people will need over the next two decades.
From the perspective of St Andrew’s, the picture is very clear. Our region needs new small household memory support environments. It needs contemporary high care infrastructure. It needs the capacity to keep older people close to family and country, instead of sending them an hour or more north or south to find a bed. We have the operational maturity, the design thinking, the community trust, and the workforce strategies to deliver these homes.
But no amount of willingness can build a facility without three missing ingredients. Funding must reflect the real cost of accommodation, external capital must be encouraged through an investment model that makes sense, and suitable land must be available.
If government adjusts the funding settings, if the Pricing Review unlocks avenues for external capital, and if Crown lands, Councils or private developers are willing to bring land to the table, then providers like St Andrew’s can build. And we will. The willingness is already there. The capability is already there. What we need now is an environment in which building new homes becomes possible rather than improbable.
Older people in regional Australia deserve the same access to safe, modern, dementia capable accommodation as those in metropolitan areas. The capability exists, the community demand is clear, and the desire to deliver is strong. What we seek now is a policy and investment framework that turns that desire into real buildings and real homes.
