The retirement commissioner is looking at a shake-up of the retirement sector, saying the current commercial model needs to change.
Commissioner Jane Wrightson has released a discussion paper on the Retirement Villages Act, which looks at the current framework, issues in the sector, and possible remedies.
In particular, it calls for a review of the resale and buy-back of units, the sharing of capital gains, and the level of weekly fees charged after a resident leaves a unit.
Wrightson said most villages were fine and most residents happy, but there were issues at the margins that needed to be considered.
"There are issues around clear understanding by intending residents of the legal framework they are entering into, which is difficult," she said.
"Some residents are raising issues about resale and buy-back times when you want to put a villa in an estate or you want to move somewhere else. It can be quite complicated.
"All of these are balanced with the fact that there are also a range of different village types, from the large corporate to the smaller organisations, so it's not an easy sector to take a black and white view on."
She said capital-based, resident-funded model of the industry would have to change.
"If you look at how you go into a village, generally speaking people will sell their free-hold house, use part of that capital to buy an occupational right agreement (ORA) and then live off the rest of that capital - that's the traditional model.
"You only have to look at the declining rates of home ownership, the potential impacts of Covid and various other matters relating to people's financial health to suggest that model might not work much longer."
However, the Retirement Villages Association (RVA) has pushed back against the paper and calls for reform.
RVA president Graham Wilkinson said New Zealand already had a world-leading regulatory framework and did not need a review.
"We support some minor amendments to the disputes process and the disclosure statement regime, but in general we consider the Act offers residents a high degree of protection and does not need to be reviewed."
He said the report contained a number of inaccurate statements that did not reflect the reality of the industry, pointing to a case study which he said misrepresented the facts.
Feedback on the discussion document closes on 26 February.
The full document can be found here.