Sector sees 60% decrease in new bed growth
Accommodation funding needs to be increased or construction costs need to be reduced to make new builds feasible, Bolton Clarke executive Tim Hicks tells AAA.
The residential aged care sector only delivered 800 extra beds during 2024-25, despite 5,000 new residents accessing aged care services every year since 2022-23, a data analysis by Bolton Clarke shows.
This represents a 60 per cent reduction in new bed growth from 2023-24.
Growth had peaked at around 6,500 beds in 2018-19 before falling to an average of approximately 1,500 beds per year since 2020-21.
Speaking with Australian Ageing Agenda, Bolton Clarke executive general manager of policy and advocacy Tim Hicks said he predicts this downward trend will likely continue.
The shortage is largely driven by the current funding model making it unattractive to build, partnered with a growing number of older Australians entering residential care, Mr Hicks explained to AAA.
In short, “demand is racing away in front of supply,” he said.
The analysis follows the release of the 2025 Aged Care Service List by the Department of Health, Disability and Ageing earlier this month and the 800-bed figure is based on net bed growth, with residential aged care seeing around 1,700 new beds built but others closed, Mr Hicks told AAA.
“While government figures showed around 21,000 vacant beds nationally, our view is that a significant proportion of these were not actual vacancies, with bed numbers reduced through factors such as renovation and transformation of shared rooms into single accommodation aligned with changing resident preferences,” he said.
Location also plays a part in the changes to the supply and demand of beds, as vacant beds are not necessarily in areas where there is demand.
To address the shortage, new builds have to be made more feasible, by either increasing the accommodation funding or reducing the cost to build, Mr Hicks said to AAA.
There may be some scopes to reduce costs, with effort currently being made to contain construction cost growth but “it’s not likely that there’s going to be a magic bullet there that the aged care sector can find,” Mr Hicks acknowledged.
He also pointed out that although the government has increased aged care funding in the last few years, that funding has gone to expanding the workforce and creating new home care packages – not to building more beds.
Mr Hicks said the government’s accommodation pricing review may help address the issue.
But with the review not reporting until the end of this financial year, Mr Hicks told AAA a response is unlikely to come earlier than the May 2027 budget, meaning the sector is “quite a long way off” from getting the funding boost needed to drive growth to beds needed now.
Mr Hicks also noted that creating a business case for new homes in diverse locations requires policy change.
“Policy needs to fix the supplement for supported residents and factor in a reasonable margin for care and hotel services, or the business case for building residential care over retirement living will continue to fall short,” he said.
Another solution could be in the reallocation of funds already earmarked over the four-year forward estimates period, he added.
“Departmental projections suggested there would be almost 9,000 residents in 2024-25, rising over the next decade to an additional 11,000 residents per year,” Mr Hicks said.
“Demand is growing but between 5,500 and 7,000 additional residents per year seems like a more reasonable projection over the four-year Commonwealth budget forward estimates.
“To the extent that Commonwealth budget forecasts reflect this overstatement of future demand there may be funding that could be directed to support construction of new beds and meet the immediate undersupply that is already affecting older people across Australia.”
Comment on the story below. Follow Australian Ageing Agenda on LinkedIn and Facebook, sign up to our twice-weekly newsletter and subscribe to AAA magazine for the complete aged care picture.
