Building care accomodation

in turbulent times

Building care accomodation

On my return from vacation I found that the new policy rules had been published for care under the Exceptional Medical Expenses Act – as Marlies Veldhuijzen van Zanten, the Netherlands’ State Secretary for Health, Welfare and Sport, had indeed previously announced in June. With due regard for a transition period, as of 2012 the capital taxes of intramural institutions will become dependent on the production of the care institutions. This will result in higher risks to these institutions, including interest risks, which is a new phenomenon in this sector. The State Secretary also announced in the margin of her June letter that these new rules would be supporting “separation of housing and health care”, which will be introduced in 2014.

At the same time as this was happening, we were startled by a fresh tremor in the financial markets: the downgrade of the US by S&P, on top of the euro crisis. The stock exchanges dropped even more as a reaction to this. The future of the dollar as the world’s leading currency is now under discussion.

As a result of this turmoil, the capital market interest has now dropped below 2.5% (10Y swap interest), while the new reimbursement rates are based on a notional interest rate of 5%. This is evidently a stroke of luck and is in keeping with the position that care institutions must now quickly make investments if during the transition period they still want to use the reimbursement of interim accommodation, which will be completely canceled as of 2018.

One does have to keep in mind that the extent of coverage of many pension funds has ended up in the danger zone again as the drawback of the lower share price and low interest rates. The result of this is that the disposable income of the elderly is threatened. In combination with the health care excess, the result of this may be that the elderly will hesitate to pay a high rent for a care apartment.

In the past few years there has been a constant call for building on the basis of demand. This was aimed at qualitatively better accommodation for the elderly, but of course this is not in store for everyone, as not everyone is in a position to aff ord this type of accommodation. Drawing up a proper business case in which both supply and demand and fi nancial feasibility are included is a necessity more than ever. By making a comparative assessment, the administration shows its professionalism: another condition for a feasible business case in terms of the possibility to fi nance it.

If every care organization makes its choices with attention to detail it will result in a healthy mixture of aff ordable and high-quality accommodation, which is exactly what the market demands. And this is also feasible due to a low interest rate.