As the first of the baby boom generation approach their 70s, rest home owners say New Zealand is facing a residential care crisis.
Healthcare New Zealand says an increase is needed in the number of elderly care residential facilities.
Chief executive Martin Taylor believes a chronic shortage of beds could come as soon as 2011, and planning should have been done years ago.
However, he says owners do not know from year to year what funding they will receive from district health boards.
Mr Taylor says this makes owners reluctant to risk expanding their businesses and the uncertainty will have an impact on the whole community.
The Ministry of Health says there is no reason why rest homes should not be given funding for more than a year to help with planning.
Health Minister David Cunliffe has ordered a strategic review of elderly care services, which the ministry expects to do before the end of this year.