If you needed further proof of the impact the Government’s proposed new liquidity standards will have on operators’ development plans, read these sobering comments from Southern Cross Care (SA, NT & Vic) CEO David Moran.
As we have reported, the proposed standards would require residential aged care operators to hold onto quarterly 35% of cash expenses plus 10% of quarterly refundable deposits – including ILUs.
David has told The Weekly SOURCE his organisation was in a strong cash position and could meet the revised liquidity requirements, but timing the use of debt with prudential cash fully tied up would likely add two to three years to each new development.
“For our organisation, the amount of cash we will be required to hold will increase by more than 40%, to $93 million, simply due to the inclusion of retirement living,” he said.
“Having to hold such a level of funds limits what we can re-invest into new aged care development. This will slow everything down by a rate of years and significantly impact Australia’s pipeline of new residential aged care and retirement living supply by providers who specialise in both care and accommodation.”
No new taxpayer cash for aged care
With few new aged care beds and villages being built, the sector – and the country – cannot afford for this to happen.
Building new developments is already moving further out of reach for developers.
The Housing Industry Association (HIA), the peak body for the residential housing sector, yesterday released a report commissioned from the Centre for International Economics (CIE) on Taxation of the Housing Sector which found taxes, regulatory costs and infrastructure charges for new housing have doubled in five years – see below.
With such thin margins, how many developers can afford to build and add new housing stock?
At the same time, former Labor Defence Minister and former US ambassador Kim Beazley has warned in The Australian the Labor Government needs to lift military spending to at least 3% of GDP in line with US demands.
Currently, Australia spends 2.5% on defence – where will that cash come from?
The Government will not be handing out big dollars to operators to build new aged care homes and seniors’ housing.
This responsibility will therefore fall on the sector.
As we have stressed, there is no doubt that new standards are needed to protect vulnerable older Australians.
But stifling supply at this critical juncture would do more harm.
The deadline for consultation on the proposed new Standards has been extended to 5pm, Friday 14 March (tomorrow) – you can provide feedback here.
