As older Australians’ wealth skyrockets, renting pensioners do it tough

By Leith van Onselen

Although older Australians have captured an increasing share of Australia’s wealth:

Largely because they have increased their home ownership rates over the past 55 years at the same time as home values have skyrocketed:

The situation is nowhere near as rosy for Australia’s renting pensioners, who are doing it tough according to a new report from Mission Australia. This report shows that nearly 22,000 people aged over 55 sought homelessness services between 2015 and 2016, up 15% from the previous year:

At the time of the 2011 census, nearly 15,000 people, or one-seventh of all those experiencing homelessness, were over the age of 55. Further, 21,600 people aged over 55 were seeking specialist homelessness services (SHS) in 2015–16. This was an increase of 15% from the previous financial year and a greater proportional increase than that of the general population seeking assistance. The majority of those people over 55 years seeking assistance were from single person households. Financial difficulties, domestic and family violence and housing crisis were among the top 3 reasons for seeking homelessness related assistance for people aged over 55 years of age…

As evidenced by the recent census data, the ageing population in Australia is rapidly increasing, and rising housing costs coupled with the limited availability of social and affordable housing, places further strain on older people on low incomes. It is crucial that all levels of government adopt immediate measures to prevent and address homelessness amongst the ageing population.

There is a clear and immediate need to increase the availability of supported accommodation models including residential aged care facilities that cater for the complex needs of older people who have experienced homelessness or are at risk of homelessness. It is also imperative that governments act to increase the social and affordable housing stock across the country and dedicate a proportion of new stock to older people.

A review of retirement incomes is also required to ensure that older people can meet the cost of living. A particular focus is needed on social security payments for older people who do not own their own home and single older people, including the growing numbers of older women at risk of homelessness.

These findings argue for broad reforms to both the housing and the Aged Pension systems.

On the housing side of the equation, there is a clear need for greater public investment in social and community housing, as well as reforms to taxation arrangements to boost affordable housing via targeting negative gearing at new builds (similar to Labor’s policy). We also need rules that give greater security of tenure to renters, like those that exist across much of Europe.

Regarding the Aged Pension, it should be reformed to provide less taxpayer assistance to wealthy home owners and more assistance to renters, via:

  1. Including one’s principal place of residence in the assets test for the Aged Pension at some point in the future (e.g. 1 July 2020), thus allowing current retirees and prospective retirees adequate time to make arrangements.
  2. Once implemented, raising the overall assets test for the Aged Pension, and the base rate as well.
  3. Extending the existing state sponsored reverse mortgage scheme, the Pension Loans Scheme, to all people of retirement age so that asset (house) rich retirees can continue to receive a regular income stream in exchange for a HELP-style liability that is recoverable from the person’s estate upon death, or upon sale of the person’s home (whichever comes first).

Under this plan, house-rich pensioners could continue to receive a regular income stream as they do now under the Aged Pension, but with less longer-term drain on the Budget and on younger taxpayers. At the same time, the circa 20% of renting pensioners would receive greater financial assistance – both via and expansion of the assets test and an increase in the base rate (see here for a detailed examination of this issue).

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  1. boomengineeringMEMBER

    Not in every case but a lot of those wealthy older Australians did it tough all their lives carrying the renting crowd via taxes, doing without (while the renters lived it up) to service their mortgage and finally on their feet now asked to do the heavy lifting once again.

    • And a LOT of the home owning crowd who own multiple dwellings have negative gearing being carried by the current renting class.

    • Gen Y Home Buyer

      This is a spurious argument. Getting less free money from working taxpayers for doing nothing is not doing the heavy lifting again. If you live in a 3 million dollar home, you shouldn’t be getting free money from working taxpayers – full stop. No, you didn’t pay previous taxes into a big honeypot for you to now draw down on the public purse. You’ve paid taxes all your life, great! You received many benefits from those taxes including roads without tolls, education without fees, cheap and subsidised public transport, cheap housing, protected labour market, etc. Think of today’s taxpayers – getting none of the benefits you received through your lifetime while also being taxed heavily to subsidise people in 3m homes who are entitled.

      • Not only that, but most of those owning $3 million homes paid a fraction of what they’re worth now. As their equity grew, they were able to pick up extra properties on the way.

  2. Becareful about ‘affordable housing’ schemes. It has been abused by UTS to build accomodation for foreign students.

  3. Not convinced renting aged pensioners should be able to access any greater benefits than renting others. Also not convinced aged pensioner home owners should be encouraged to downsize or reverse mortgage. For many the home is their prime asset and their bequest to their children. A few may be fortunate and sit on prime real estate but most do not.

    Any change must be years out, say 2030, giving ample time for adjustment. It may be that by 2030 welfare schemes like NDIS are costing more than aged pensions.

    Should aged pensioners be compelled to purchase health insurance, late in life care being a major cost to the health system. Should aged pensioners receive free cancer treatment after the age of 65. The economics of aging can be harsh. In times past some cultures just let nature take its course.

    • @Daniel, “A few may be fortunate and sit on prime real estate but most do not.”

      The median Australian’s got a net worth of $400K+. (The average, which is more influenced by the Gina Rhineharts of the world, is higher still.) Trust me, most DO sit on prime real estate.

      The thing is, there’s a non-insignificant “working class” of police, nurses, teachers, web site programmers, clerks, civil servants in office jobs, etc. who earn good money that would in just about ANY other society be enough to buy a home, but here it’s only good enough to pay rent with maybe $500 per month left over if that, once other required bills are taken care of.

      And this working class is only getting larger.

      This means more and more trouble in the future, as these people WILL need housing in their old age, and due to the huge rents they’re having to pay, they haven’t been able to “budget” their way toward a livable retirement because they “budget” each month just to keep ends meeting.

      • Spot on – most do sit on prime real estate. Many bought in cheapish areas years ago, and these suburbs are now super-expensive. Other areas that are more expensive are now way out of anyone’s league unless they have received an inheritance or lottery win.

  4. And this is the conundrum faced by those who cant/wont make the sacrifices needed to buy where they want to live.
    If you don’t own the property you live in when you are retired you will, unless you are very wealthy, be increasingly poor.
    So perhaps young people should buy where they can afford to and retire t0 live in that place.
    Many/most people won;t have the discipline to build a portfolio of other assets that increase in value with inflation and not raid it. And most alternative assets do not have the tax incentives that your own home has (once you reside in it, which could be for 25 years after retirement.
    And if those pensioners are struggling, they won’t be helping their children buy a house either. No deeds to put up, no income to lend/give, no significant credit so can’t borrow to assist. Their kids are so far behind. No wonder poverty persists across the generations.

    • What a pile of stinking bullshit. Those days of young people buying a house in the same city where they work are gone. Moving to where there’s no work doesn’t, uh.. work. The whole problem is caused by property speculators, both local and foreign.

  5. Partly, this is an issue because of where pensioners choose to live. They often want to stay in the city or retire to the coast, where housing is more expensive. Few consider inland towns, which have cheaper housing and adequate facilities. The lack of jobs in rural Australia shouldn’t matter to them so much once they’re on the pension. Plenty of opportunities for a healthy outdoor lifestyle, easy enough to stock up on books. Problems of course with social isolation if they leave their family and friends behind. Internet speeds are crap too.

      • There is some truth in that. Clearly, research would be needed before moving to a rural town. However, there are plenty of places with decent public hospitals and GPs who bulk bill. Sometimes you have to ask and explain your financial circumstances.

      • I lived in a mining town in QLD as an immigrant, working an award-rates job that paid below-cost-of-living that no sane Aussie would take in order to get into the country. And definitely, there weren’t bulk-billed medical services available. I believe that the minimum cost above the bulk billing rate was $20 extra for a minimal GP consult.

    • Yeah, the less-able tend to prefer to live near their support networks, who can come running if there’s trouble, take one grocery shopping, take one to medical appointments, go to dinner with them a couple times a month, etc. It turns out that pioneering into the wild west is more attractive to 20-somethings than to 70-somethings. Who’d’a thunk it?

      • I’m not suggesting they go live in Wild West mining towns. Moving to a regional area is an option and more pensioners should consider it. There’s lots of nice areas, if you look around and do some research.

      • @Monkey the challenge is that as we age, we’re less able to do for ourselves, AND we still need social connections. Even younger folks realise that they were dreaming when they thought friends and family would bother more than once every year or two to visit them at the central coast. And age brings with it the inability to drive safely. So really unless one wants to live out one’s entire rest of one’s life outside of civilisation, it’s important to be on a rail line that provides reasonable (say within a few hours) access to larger cities with actual specialists, things to do, etc. And no, the answer is not to dump all the poor into retirement warehouses out past Orange once they can’t afford to make ends meet on the pension.

        I’d be the first to move out to south of Goulburn or north of Newcastle if we had a very fast train that made it < 2 hours to Sydney, including the connecting service to my town outside of Goulburn to the fast train stop in Goulburn, that ran often enough that I could make a day of it and return home without the cost of a hotel overnight. Don't mind the countryside. The isolation since I am not a good driver freaks me out, though. Alone in the world, it'd be too easy for me to be forgotten as not worth anyone's bother to visit, and I'd be a shut-in in my own home. Doesn't really work for me. 🙁

  6. If the biggest problem stopping older people from moving to regional towns/centres to retire was stamp duty, pension and health care issues – surely they are easily solved.

    There should be policy that states the following:

    – If you downsize from a capital city to a regional town, the proceeds you get from the sale are not included in the asset test for the pension.
    – Over 65’s in regional towns / rural have full access to bulk billing, and GP’s are more subsidised.
    – Downsizers are exempt from paying stamp duty on the new property.

    Surely this would be cheaper then hundreds of billions of dollars of new freeways, hospitals, trains, etc. ?

    • These sound reasonable to me as long as they were protected from rorting by people who moved out bush then moved back within a couple years, to be able to cash out their home without it being in the assets test, and then able to buy a home out bush without stamp duty that they could resell for greater profit to downsize to a city unit. I’d worry that it would mostly be couples that would take that up (see: previously mentioned of lack of friends/family support out bush) as a permanent option, and that the surviving spouse would come right back as soon as they were alone.

  7. The Wealth Navigator

    As someone who sits on the board of a charity that builds homes for disabled people, here are my comments.

    If you want investors to build social housing, which often costs more than normal housing due to things like access issues etc, then there needs to be some compensation for the lower rental income collected from social housing – otherwise they will just focus on traditional housing. For example, why is GST charged on residential housing construction costs for this sort of housing? Capital gains tax savings won’t cut it as it is too far in the future and who knows if it will still be there.

    If an investor invests in new homes because they are able to access negative gearing, what happens when they want to sell and the next investor can’t access negative gearing? What does that do for the returns for that investor and will they push up rents to compensate?

    What is the cost to the budget of the government building all this extra social housing? Has anyone done the analysis that compares this cost with tax incentives for the private sector / charity / community housing etc to supply this. Can you remember the costs the government paid under the Rudd’s schools programme?