Aged care is turning the family home into an entry fee

Scarce aged care places increasingly favour families able to pay large accommodation deposits, drawing on housing wealth that may be the only debt-free asset shared across three generations.

Last week I gave a preview of the resilience index through its health dimension, using particular communities as the example. This week we detail one angle that straddles both health and financial resilience: what happens to a family when a parent needs aged care.

For a few decades after the war, an ordinary wage could buy a house. A machinist, a train driver or a process worker could take on a mortgage, pay it off and own something outright. That had almost never happened before in human history. It has not happened much since.

Those workers are now in their seventies and eighties, part of an ageing boomer generation. The house they paid off is, for many families, the only debt-free asset across three generations. The parents own it. Their Gen X children are still paying off their own. Their Gen Z grandchildren cannot get near one.

Then one parent has a fall, or dementia reaches the point where home is no longer safe. Then suddenly a family meets the aged care system. What it finds is a queue, and a price for getting to the front of it.

The queue

Residential aged care is about 95 per cent full, on a departmental estimate from January. The sector added a net 802 places in 2024–25. An independent review commissioned by the government says the country needs 10,600 more every year for the next 20 years. Last month state governments counted more than 3,600 older people in hospital beds, medically ready to leave, waiting on aged care.

When beds are that scarce, providers choose. The review, tabled in April, did not dress this up. It found that “providers preference residents who can pay more for their accommodation”. The Commonwealth-funded Older Persons Advocacy Network calls it cherry-picking.

Families learn quickly what moves an application to the top of the pile. It is the refundable accommodation deposit. The average advertised room price passed $600,000 in May, according to Mirus Australia. The average price new residents actually agreed was $470,000 in 2024–25, the latest official figure. At Regis, the big listed provider, the average advertised price is now $750,000, up 38 per cent since December 2024.

The house you cannot sell

The system assumes the house will pay. For many families it cannot. One parent goes into care while the other is still at home, still well and going nowhere. You do not sell the roof over one parent to buy a room for the other.

The rules half recognise this. A home with a spouse living in it is exempt from the aged care means test. But the exemption does nothing about the price of the room.

That leaves two options. The first is the daily payment, which is the deposit converted to interest at a rate set by government. That rate is now above 8.4 per cent, the highest in more than a decade. On the average advertised room it comes to about $140 a day, or more than $50,000 a year, and none of it comes back. The basic daily fee, set at 85 per cent of the single pension, is on top.

The second is that the children find the money. They pool savings. They redraw on their own mortgages. They borrow against the house they have not finished paying for to protect the one their parents did. Advocates have told the government of carers selling their home to secure a place for a partner.

Where it goes

The deposit is refundable, and the industry will be quick to say so. But since November 2025 providers keep 2 per cent of it a year for up to five years. On a $600,000 deposit that is about $12,000 in the first year and about $57,000 over five. While they hold the rest they hold it interest-free, with a Commonwealth guarantee behind it.

A family that borrows $600,000 to fund the deposit pays about $39,000 a year in interest once the latest rate rise is passed on. So the provider gets free capital, and the bank gets paid for supplying it.

Regis told the market in August what the new rules are worth. Retention alone should deliver more than $50 million a year in recurring earnings once fully phased in. Repricing its rooms should bring in more than $500 million in future cash. Statutory net profit rose 14 per cent to $55.7 million. Over the same year the share of its residents on government support fell from 43 per cent to 39 per cent.

Its then chief financial officer was explaining why retention will matter more and more. He needed five words. “There’s $50 billion out there.”

That $50 billion is not venture capital. It is houses. A good many of them were bought on working-class wages.

The industry has a ready answer. Most aged care is not run for profit, so there are no investors to enrich. The first half is true. Not-for-profits care for 59 per cent of residents. For-profit operators have 38 per cent and governments the rest.

But the rules do not ask who owns the building. A church-run home advertises a deposit, holds it interest-free and keeps its 2 per cent, exactly as a listed company does. Of the roughly $48 billion in deposits the sector held at June 2025, not-for-profits had more than $26 billion. For-profits had $21.6 billion, which is 45 per cent of the money from 38 per cent of the residents.

The profit sits where you would expect. For-profit homes made $22.44 per resident per day before tax in 2024–25. Not-for-profits made $6.35. Both figures predate retention. The review says its aim is a sector that can generate “investable returns”. Aged care is being redesigned to attract capital, and the nearest capital is the family home.

The other pocket

Now look at the children. Gen X is aged 45 to 61 and carrying mortgages its parents would not recognise. The Reserve Bank has lifted rates four times this year. The cash rate is 4.6 per cent, the highest since 2011. On Canstar’s numbers, a borrower with a $600,000 mortgage will pay about $360 a month more than at the start of the year once the latest rise flows through.

The Reserve Bank calls this returning inflation to target. In the household it works by taking money out of the pay packet, and the money goes to the bank. In August the Commonwealth Bank reported a record cash profit of $10.98 billion.

So, the same family pays twice. Its wages move up the chain to bank shareholders. Its parents’ house moves up the chain to aged care operators.

Then there are the grandchildren. Gen Z already knows a wage alone will not buy a house. In a family like this one, the way in was always going to be the grandparents’ place. It would be sold one day, split between the children and passed down as a deposit. That is no longer a reality.

The Productivity Commission found that inheritances usually arrive at about 50, which is to say they arrive for Gen X. It has also said they matter most to those with least. Measured against what a household already owns, the boost is about 50 times larger for the poorest fifth than for the wealthiest.

A wealthy family can pay a deposit, forgo the interest and not notice. A working family is paying with the only inheritance it will ever have. Each year in care takes 2 per cent off the top, or $50,000 in daily payments, or the interest on a loan the children took out to cover it. What comes out the other end is smaller, later and already spoken for. The grandchildren were counting on that house, and nobody has told them the plan has changed.

What the government says

The government’s position is that those who can afford to contribute more should, so the system stays sustainable. Its reforms lifted the price a provider can charge without approval from $550,000 to $750,000, now indexed to $789,686. They introduced the 2 per cent retention.

In April the government announced a $3 billion aged care package for the May budget. The budget put $1.7 billion towards an initial response to the review. It funds new capital subsidies from January 2027 and a higher supplement for residents on support from March 2027. They are clearly trying and the stated aim is 5,000 extra beds a year.

The review’s biggest idea was $2 billion a year in interest-free loans, so that new beds would not depend on wealthy residents. Late last month the Final Budget Outcome showed it spent $1.4 billion less on aged care in 2025–26 than it had estimated in May, the largest shortfall of any program.

Of course this cannot be considered as nothing. But read the review closely. Under current settings new beds only stack up if most of their residents can pay a deposit. Banks reportedly want 60 per cent. So the system builds beds where the wealth is and rations them everywhere else. Whether deposits should exist at all has been deferred to 2035 at the earliest.

The post-war settlement gave an ordinary family one thing to pass on, and the system now collects it at the door.

Anyone wondering why voters in their fifties have stopped listening to the major parties could start here. Political parties that say care should not depend on means could start with the queue.