Parallel paths on track to converge

The operators of Australia’s retirement villages have spent decades insisting they are not aged care.

In that belief they have received tacit support from successive federal governments, which have been content to accept that distinction for years.

But it appears the government has had a change of heart.

The recent $3 billion capital commitment by the federal government to aged care – a central pillar of the 2026-27 federal budget – was rightly reported as a supply crisis response driven by the Independent Review of Residential Aged Care Accommodation Pricing.

This makes sense because the numbers are brutal.  Australia needs 10,600 new aged care beds per year for the next 20 years. Last year, only 802 net new beds were delivered.

Happily, Perth is named as a priority in that commitment.  Great news in a world where providers are reporting residential care facility occupancy rates exceeding 99 per cent.

However, buried in chapter seven of the review was something very interesting: a formal recommendation for harmonisation between residential aged care and retirement living, and recognition that capital investment decisions in one sector now directly impact the other.

The review notes that many aged care providers already operate across all three care sectors (in-home support, retirement living and residential care) and identifies “synergies and opportunities” for government to integrate both sectors into a “holistic aged care system”.

Elsewhere, there are moves afoot that recognise this opportunity and imperative.

• South Australia has already moved. Its Planning, Development and Infrastructure (General) (Essential Infrastructure and State Agency Development) Amendment Regulations 2025 reclassified aged care facilities as essential infrastructure and explicitly extended that definition to co-located retirement villages. This change, which came into effect in late 2025, means these integrated developments can bypass local council assessments to be fast-tracked through a state-led approval process. No doubt, others will be watching.
• St Vincent’s Health Australia chief executive Chris Blake has warned the aged care system faces severe capacity shortages within four years. His proposed response: a hub-and-spoke model positioning retirement villages and residential aged care homes as frontline care delivery points, supported by technology and hospital-level clinical oversight. Relevantly, St Vincent’s has committed to scaling its workforce to 30,000 staff by 2030 to deliver higher-acuity care in non-hospital settings (including retirement living).
• The Shared Care pilot, funded by $5.2 million over three years from the federal budget, offers a preview of how federal funding might enter the retirement village operating model. It allows residents receiving support-at-home packages to pool budgets for collective services.

The direction of travel is subtle but unmistakable. Federal policy, state planning reform and provider strategy are converging on a single proposition: retirement living and residential aged care are no longer parallel systems, they are simply two parts of the same thing.

Many call this integration the way of the future. It certainly should be. However, the question for operators is, which side of history will they be on?

For operators who are also registered aged care providers, integration is largely an opportunity and one they have been chasing for decades. They can capture federal care funding flowing into their own villages, and position for the planning concessions that infrastructure status delivers. Their villages become feeders into their own residential care beds; a vertically integrated model the review explicitly encourages.

Operators who are not aged care providers face a strategic choice that can’t be deferred for too much longer: build care capability now (through partnerships, joint ventures or registration) or accept a narrowing role as accommodation-only landlords in a system that is going to be increasingly designed around integrated care over the next decade.

Operators who recognise this, and act on it, will shape the next generation of seniors housing. Those who do not may very well find themselves legislated, partnered or competed into irrelevance. The wall between retirement living and aged care is coming down. The only remaining question is whether you are building on the right side of it.

This article first appeared in the May 2026 edition of Business News magazine as part of Amber Crosthwaite’s regular opinion column. 

Disclaimer

The information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.