Juniper’s proposed 128-bed aged care development in Northam, Western Australia, is progressing through development approvals. But its financial viability remains uncertain.
The provider’s business case relied on a higher residential aged care funding increase than the Commonwealth delivered.
“The cost of delivering care is rising faster than funding, leaving providers to absorb higher wages and operating expenses while many services already operate at a loss,” Juniper CEO Russell Bricknell explains.
Combined with rising construction costs in WA, he described the project’s viability as “borderline at best”.
For boards overseeing aged care developments, Northam illustrates a difficult investment decision: whether to continue committing capital when the financial assumptions supporting a project have changed.
More than 3,600 aged care beds shelved or at risk
Ageing Australia initially reported more than 3,000 planned beds cancelled, delayed, reduced or placed on hold, including 938 in Victoria, 933 in WA and 535 in NSW.
The peak body has since reported more than 3,600 beds shelved or put at risk, with further developments hanging in the balance.
From 1 October, the Australian National Aged Care Classification (AN-ACC) price increased by 2.55%, from $295.64 to $303.19 per resident per day.
The Commonwealth says the increase follows independent pricing advice. However, StewartBrown modelling cited by Ageing Australia suggests approximately 5.2% was needed to reflect rising costs.
“The aged care sector isn’t short of providers willing to build new facilities. What’s missing is the confidence that those facilities will be financially viable,” said Ageing Australia CEO Tom Symondson.
“The Federal Government’s recent AN-ACC funding decision has made matters worse, tipping projects that were already on the edge into being financially unviable,” he said.
“We’re now seeing new aged care developments delayed, scaled back or cancelled altogether. And there are more projects hanging in the balance, with providers desperately trying to make the numbers work.”
The funding pressures come as Ageing Australia calls for a national investment plan to support approximately 10,000 additional residential aged care beds annually.
What happens to investment already committed?
Juniper’s Northam project remains in the development approval process, with considerable planning work already completed. Bricknell said the business case also depends on accommodation supplement payments not being reduced if Commonwealth capital grant funding is provided.
The supplement helps providers meet accommodation costs for eligible residents. Any reduction could affect the ongoing revenue assumptions underpinning the development.
“While we are not disclosing specific expenditure, continued uncertainty has the potential to increase costs and place further pressure on project timelines,” Bricknell said.
“Cost pressures are increasing with no view on when they might decline.”
Funding pressures extend to Victorian developments
In Victoria, Abound Communities is assessing a proposed aged care development at the feasibility stage. CEO Katherine Burton said current funding arrangements are affecting its prospects.
“If the funding increase falls behind costs, we don’t even break even and end up having to use our reserves, which erodes our balance sheet,” Burton said.
“None of that puts us in a position to build more beds.”
Burton said funding increases would need to reach around 7–8%, rather than the current 2.55%, alongside greater Commonwealth capital grants to support further investment.
What does this mean for future investments?
For Bricknell, long-term sustainability is central to any investment decision.
“That reality means any new development must be carefully assessed to ensure it can remain sustainable over the long term,” he said.
Warrina Homes CEO Andrew Curle said long-term financial planning is difficult when providers have limited control over funding and operating costs. Government funding accounts for approximately 80% of sector revenue, while employee-related expenses make up around 80% of operating costs, he said.
Curle also questioned the lack of clear annual funding guidelines, which providers need to assess the viability of major developments. He warned that the current approach “creates significant financial pressure on providers and risks undermining the sustainability of organisations”.
For boards, the challenge is deciding whether the original business case still supports further investment. They must assess the additional capital required, the cost of delays and whether the completed facility can operate sustainably under current funding arrangements.
Changes to project timelines and projected returns could also affect financing arrangements, lender confidence and future capital allocation. So for boards with developments in the pipeline, the decision is whether to proceed, revise their plans or delay further investment until the financial case improves.
