Housing wealth drives aged care divide

Australia’s residential aged care system is becoming increasingly dependent on the housing wealth of incoming residents, creating a growing divide between providers in affluent areas and those caring for larger numbers of supported residents, according to new analysis from Mirus Australia.

The report, Residential aged care subsidy and cost, 2017–2025, found the Commonwealth accommodation supplement rose just 27.3 per cent between 2017 and 2025, lagging behind both house price growth (85.0 per cent) and the cost of care (111.4 per cent).

Which, Mirus Australia says, has resulted in a system where the viability of new aged care developments depends increasingly on whether residents can contribute refundable accommodation deposits drawn from rising housing values.

“A resident who owns a median house arrives with an asset that has appreciated 85.0 per cent in nine years and can fund a refundable accommodation deposit priced off that market,” the report states.

“A resident who does not arrives with a Commonwealth contribution that has fallen 0.8 per cent in real terms over the same period.”

The report also shows that a median Australian house now funds 43.4 years of accommodation supplement payments, up from 29.9 years in 2017. Had the supplement kept pace with housing values, it would now sit at $101.75 per day, rather than the current $70.

Report author and Mirus Australia head of data and insights Tyler Fisher said the gap was reshaping investment decisions across the sector.

“Accommodation funding now depends far more on the housing wealth of incoming residents than on how well a home is run,” he said. “For a home in a lower-value area with a high share of supported residents, the numbers for building new beds don’t add up.”

The analysis argues that two equally well-run aged care homes can face vastly different prospects depending on their location and resident mix.

“A home in a high-value catchment with a low supported ratio can price accommodation off the local housing market and build. A home in a low-value catchment with a high supported ratio is funded at a rate that has gone backwards against its own construction costs, and cannot,” the report states.

“That is a sorting mechanism, and it sorts the wrong way.”

The paper credits the federal government’s May 2026 response to the Accommodation Pricing Review as the first significant attempt in a decade to address the issue, particularly through higher supplement rates for homes with large numbers of supported residents and new capital subsidies.

However, it estimates the package could still leave funding around 24 per cent short of a housing-price benchmark by 2028 if current trends continue.

Mr Fisher outlines five options to address the growing gap between accommodation funding, housing values and the cost of building residential aged care beds:

• Index the accommodation supplement to something it actually buys, such as a construction cost or property index, rather than CPI. Mirus Australia argues CPI indexation has steadily eroded the supplement’s value against accommodation costs.
• Index the maximum room price annually and publish the index, giving providers greater certainty when planning long-term investments and developments.
• Tie the supported-resident loading to local housing markets as well as resident mix, recognising that homes with similar supported-resident ratios can face very different economics depending on local property values.
• Separate accommodation and care funding and reporting, so each service line is funded and assessed on its own merits rather than accommodation losses being covered by care funding margins.
• Close the efficiency gap providers can control, Mirus Australia noted there remains a significant difference in financial performance between top- and bottom-performing operators under the same funding system.

“We’re not only asking government to act,” Mr Fisher said. “StewartBrown’s data shows a spread of $95.66 per bed per day between the top and bottom quartile homes, under the same Act and the same pricing model. The accommodation gap is about a third of that. The sector’s case is strongest when providers are closing the part they own.”