How Boomer property parasites drain the pension

Via the ABC:

Chris Harpur understands better than most the advantages of owning property in retirement.

Like many people of his generation, the 72-year-old has reaped the benefits of booming property prices.

He said his terrace home in the inner-Sydney suburb of Alexandria had doubled in value since he bought it in 2008.

And he is well aware many young people would kill to own a place like his.

“I get the flak,” he said.

“‘You baby boomers’, and all that sort of stuff. But, you know, I have worked quite hard in my life.

As a self-funded retiree, Mr Harpur now receives a part pension while still owing $300,000 on his mortgage.

“Having a mortgage in retirement was a bad decision, there’s absolutely no doubt about that,” he said.

“There’s that old saying about being asset rich and cash poor, and I think that affects a hell of a lot of people.”

Mr Harpur decided to access the equity in his home through the newly expanded Pension Loans Scheme — a reverse mortgage backed by the Federal Government.

The scheme allows people to access a government-funded loan, paid in regular fortnightly instalments, for either a short or indefinite period.

Repayment of the loan is secured against property you own and compound interest is charged each fortnight. The outstanding balance of the loan is recovered when the property is sold or from the estate after the owner’s death.

“I have more cash on a monthly basis,” he said.

“It’s going to be amazing in the sense of having flexibility with the mortgage.”

Grattan Institute economist Brendan Coates said the Pension Loans Scheme was one of the best government policy initiatives he had seen in the past 15 years.

“We can’t continue to have such a large asset as housing sitting on retirees’ balance sheets and then not touch it at all.”

Tax system ‘biased’ against those who rent

Once a person is retired, their house — if they own one — is treated differently to other assets.

The primary place of residence is exempt from the age pension assets test, no matter what that property is worth.

While Mr Coates supports the Pension Loans Scheme, he questions the fairness of other housing policies.

A review of Australia’s retirement income system that is currently underway has already ruled out any changes to how the family home is treated in the pension assets test.

Former Productivity Commission chairman Peter Harris said there was a “tremendous reluctance to touch this issue”.

“A government should be asking that question: Are we now at the stage of public policy delivery where we should consider this question of how reasonable it is to have people who have a very, very valuable asset, not have that taken into account,” he said.

Earlier this week, 7.30 revealed older households which owned their home were, on average, more than 20 times wealthier than similar households which rented.

Experts say the tax system and government policies strongly favour property owners and discriminate against renters.

7.30 has identified at least 40 separate grants and subsidies available to property owners across the nation.

“We’ve got all these supports for people to buy housing,” Mr Harris said. “If we alter one, we’re probably going to have to alter a lot of them.”

Home ownership no longer open to all

Last year, with property prices falling, the Labor Party went to the federal election pledging to wind back two of the most contentious tax perks for property owners: negative gearing and discounts on capital gains tax.

Deloitte Access Economics’ Nicki Hutley believes if Labor’s housing policies were put to the people when “the market was still screaming ahead”, the election outcome may have been different.

But now the policies are dead.

“I think they’ve been well and truly put to bed,” she said.

Former economic adviser to the Gillard government, Stephen Koukoulas, said the rejection of Labor’s planned changes at the last election would make it harder for all political parties to propose tax reform in the future.

“It’s very easy to create a scare campaign when people are looking to either withdraw very, very favourable tax treatment on particular investments, or they propose ideas that are going to make housing more affordable,” he said.

He said there was “absolutely no doubt at all” the tax system favoured home owners and discriminated against renters.

“For owner-occupiers, any gains they have in their property are tax free. So this incredible lift in house prices, the ‘OK Boomer’ set who bought their houses 30, 40, 50 years ago, had multiple increases in the value of their property. It’s all tax free.”

Mr Coates said the need for state and federal governments to address housing affordability was more urgent than ever.

“Fast forward to today, and home ownership is really dependent upon your income.

“Home ownership is crashing amongst the bottom 40 per cent.

“It does mean that increasingly your ability to own your own home depends as much on who your parents are, as whatever endeavours that you go about in your own life.”

As we saw at the last election, youth must rip away these parasites. Boomer’s will never give them up voluntarily.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)


  1. Turkeys don’t vote for Christmas. Who knew! The dilemma for the property PM and those who follow is how to keep ownership rates sufficiently high. If they fail then a reform-orientated party will eventually sweep into power.

    Of course, the Boomers will have gone to Heaven by then with a self-satisfied smile on their faces and it’ll be Gen-X (or their children) wearing the consequences of reforms.

    • Strange EconomicsMEMBER

      But 50% of them the Gen X with OK Boomer parents will be enjoying their massive inheritances. For the other GenXeers bad luck, a low pension and rent..50% of Gen X have been told know they need to support higher prices so no rebelliion coming. See last election when they knew to vote against franking credit reform.
      Buy a place , Plus 20% govt guaranteed still to come.

    • Last I heard the boomers were working on devising a scheme by which they would be permitted to take all of their houses with them to heaven, to both live in AND rent out, all tax-free of course. Last word was that it was to pass through the house of reps as early as next week… more to come

      • With ScoMo assisting I’m sure the scheme will be successful. He’s been negotiating with the Supreme Being for some time I suspect.

  2. boomengineeringMEMBER

    I plan to live to 120, after that I will start swimming to NZ. ATM I’m paying taxes to support the younger generation and wonder if that will continue until then. My mate is 94 still paying tax and has never claimed any gov’t handout. Worse still may be paying tax for the M generation. M = migrant.

  3. It’s imaginary wealth. My parents lived like paupers while their property became worth over a million dollars. Right until they died, they shopped for cheap meat cuts at the supermarket. Should they have been forced to relocate to a small, shoddy house in an outer suburb, far from the doctor and friends they had had for 40 years? Would that be the way of a socially aware, advanced society? Leave the blame game be. It’s the fault of rent-seeking, profit-taking developers and the government’s game of mates that has priced housing out of reach of younger generations, not the fault of old dags that accidentally became property magnates while still being poorly fed. Cut immigration back to sustainable levels and a lot of this would self-resolve

    • I am young Gen X and luckily I brought me first house when I was 18. If I end up on the pension which I doubt but you never know, the last thing I would want is to have to move out of my family home in order to get the pension.

        • Our old age pensions are among the least generous in the OECD in terms of share of GDP.

          The old age pension is “flat, frugal, and heavily means tested”. It is the superannuation tax concessions that make our retirement income system expensive, and the benefits essentially go to the top 10%, with a few crumbs for the next decile down. This is a class issue, not an intergenerational issue.

          Instead of forcing pensioners out of their homes, with the fig leaf of a reverse mortgage at an extortionate rate of interest, while the genuinely rich get to keep all of their gains from the tax concessions and pass them on, perhaps we should have a universal pension, make it taxable along with any other income in retirement, and have a capital gains tax on the family home if it is in a deceased estate and not going to the surviving spouse or an actual dependant.

          • Strange EconomicsMEMBER

            So ipso facto, the system is running as a complete Success.

            This is the aim of all the systems. Benefit the top 10% , and they can lobby the pollies!

      • Jason. I got a share of it when the will was all finished. It will give me a boost because I have not yet been able to buy my own home. But it’s more like a deposit than a free house. It was shared
        Pension Loan Scheme did not exist back then. It’s great idea, a rare example of a really good idea from gov’t

        • Arthur, why the desperation to buy a house and take on crippling debt? No way to get wealthy.
          Have you thought of investing your inheritance in an ETF and not touching it for at least ten years? Look up VGAD or VGS.

    • And nor should those who come after them also have to suffer due to not being as lucky. A great benefit of including the house in the test is that a group of people who are currently strongly opposed to property prices falling would suddenly like it to. It then makes the game fairer for others. The sad thing about trying to make rigged game fairer is that many who were incidental winners may find things harder. Yet, if they really do believe that hard work should be rewarded and that they have never needed to get help from others then they should not mind the unearned gains of land rises to be corrected.

      • Umm, Footsore, yes to all of the above in an intellectual sort of way, but if it means turfing people out of their homes, well…

        • The reverse mortgage for those who wish to stay. Or they could sell up and downsize if they want to take the capital gains. They aren’t ideal options for those that wish to stay put and may end up moving, yet the result of not trying to improve access to housing for those is a society with greater problems.

    • +1. MB seems conflicted on whether houses are overvalued or whether Boomers are wealthy.

      We are simply at a point in time where interest rates are at record lows. If we ever get wage inflation (via MMT?) interest rates will rise fast and real house prices will fall just as fast. Brilliant for young workers aspiring to own a home, not so brilliant for retirees with f/a equity and reverse mortgages compounding at much higher rates.

    • ErmingtonPlumbingMEMBER

      Yes, Agree Arthur.
      Its weak as p!ss going after the soft targets that are the people you describe.
      My 93 year old neighbour is in exactly the same boat.
      Lived a frugal life, never spent his hard earned Australian dollars holidaying overseas, brought up 3 kids, nursed his dementia suffering wife to death in the house he built himself 70 years ago. (Probably had its last reno in the Late 60s when the sewer was put in)
      He’ll be dead soon enough, he’s not doing to good these days,…tax his family home through inheritance taxs if it MUST be done.

      Anyone who would challenge his right to his pension is just a straight up Cvnt.

        • Swampy. I am in broad agreement with the idea. But all GREAT BIG IDEAS have unexpected secondary outcomes. I’d like to see a discussion of what those outcomes might be before plunging in. Nevertheless, agree in concept

          • It’s always useful to have things on the table to explore rather than dismiss out of hand

            How can I disagree with someone called Arthur – our #1 has the name – although he (4yo) and I often agree most apparently because I am wrong

          • Swampy, cheers mate.
            I’m not really called Arthur, but I chose it for my moniker because I think it’s such a grand and old-fashioned name. The sort of name that implies caution, thought and wisdom.
            So damn good on you! I trust your sprouts will be much wiser than me

  4. GunnamattaMEMBER

    The issue isnt as one dimensional as this – although the one dimension (housing) is bad enough.

    The issue for younger Australians is Housing in conjunction with Superannuation/Pensions in conjunction with Debt (and the asset base supporting access to it – coupled with the effect it has on the prices of assets created in periods of lesser overall debt ) in conjunction with Jobs and Incomes (in an era of casualisation the demise of Australian jobs focused around fixed capital investment – mainly manufacturing – and the rise of ‘services’ jobs which are relocatable the moment wages become uncomfortable for capital owners in any particular location) in conjunction with the Population Ponzi/Immigration (where Australian living circumstances are attractive enough to foreigners to drive them to want to come here and either accept the debt, the working outcomes or to have ensured they have access to funding prior to arriving in Australia) in conjunction with the dismantling, under the guise of efficiency/outsourcing/industry self regulation, of previously existing regulatory regimes – affecting everything from education standards to social welfare access, to job seeking, to public sector activities, to compliance and inspections in conjunction with the financialisation of Australian education access, to provide an avenue for foreign nationals to gain access to Australian migration, in conjunction with the crowded infrastructure – particularly in the outer suburbs (where they are increasingly being shunted by paucity of employment providing opportunities to move away and affordable housing), in conjunction with the taxation System harvesting PAYE earners and gifting funds to those in a position to salt away income (Negative Gearing, CGT, Trusts, novated leases for starters) and encouraging whole industries to become financial parasite on the budget……

    and on and on and on

    Bring on the Revolution.

    • In short, the main problem is bipartisan neoliberal government policies. Free movement of goods, services, capital, and labour across international boundaries are cardinal principles of neoliberalism, and almost everything else follows from that. Instead of going after pensioners who were lucky enough to buy a modest house when they were going cheap, while the genuinely rich keep their gains, we ought to at least try voting out the major parties. Younger voters are actually keeping these politicians in power, because they outnumber the baby boomers by more than 2 to 1.

      Put the major parties (and the Greens, who are population deniers) last on every ballot paper, with their sitting member last of all. Revolution is a last resort if they try to peel off the veneer of democracy.

  5. James DaveyMEMBER

    Govt’s will never, ever address housing affordability while it’s such a cash cow for them at all levels (rates, land tax, stamp duty, GST, CGT) – why would they when there is absolutely no incentive for them to do so?