Australian retirees will face a housing crisis within 15 years unless urgent action is taken, according to the Council on the Ageing.
The lobby group for seniors hosted a policy summit in Canberra in recent days where it drew attention to the impact on older Australians of rising prices, rising rents, huge mortgage debt and the scarcity of suitable homes.
The assumption that Australians retire in a home they own underpins the nation’s superannuation and pension systems, but summit attendees heard this could be under serious threat in as little as 10 to 15 years.
Keynote speaker John Daley, CEO of the Grattan Institute, warned that the looming housing crisis is a “ticking time bomb” for this demographic.
“We must address these issues immediately if we want to stand a fighting chance to mitigate the severity of the looming housing affordability crisis and to safeguard the future of older Australians before it is too late,” Mr Daley said.
The summit heard a key threat is that more Australians are entering retirement with mortgage debt, which they typically pay off in a lump sum from their superannuation.
Others enter retirement while still renting, which radically increases the amount of disposable income they need to cover monthly expenses.
The Association of Superannuation Funds of Australia, which represents both for-profit and non-profit funds, has estimated that couples who rent for life in the eight capital cities will need at least $1 million to retire comfortably.
In Sydney, a renting couple would require a lump sum at retirement of $1.16 million, almost double the $640,000 a couple who own their home debt-free would need, ASFA found.
The huge disparity is due solely to the ongoing costs of renting. For example, a 65-year-old Sydney couple who own their home will spend — if they live comfortably — about $60,000 a year, compared to almost $80,000 for a renting couple.
The problem is even worse for age pensioners. The 2017 Rental Affordability Snapshot report by Anglicare Australia found only 6 per cent of the market was affordable for a single older person living on the age pension.
The forum also discussed the growing incidence of homelessness among older people, especially women; and the implications for age pensioners of unaffordable rental properties in the cities.
COTA chief executive Ian Yates said older Australians are increasingly disadvantaged by the lack of supply of affordable housing that meets the physical needs of older residents.
“Older Australians are increasingly falling through the cracks in the growing housing affordability and supply challenge, with a growing number of older Australians needing to rent, rather than owning a home outright,” Mr Yates said.
“We are already starting to see rates of home ownership by older Australians decline, and this is forecast to drop even further in the next 10-15 years.
“This trend is already exerting extra pressure on the rental market and on many older Australians who are struggling to pay their rent, while also juggling other rising expenses like energy.
“There is a whole group of people currently in their 50s and 60s who will be retiring as renters, or if they are lucky enough to own a house, facing the prospect of retiring with a mortgage.”
An Australian researcher has estimated that anyone who doesn’t have a mortgage by the age of 45 will probably be renting in retirement, due to price growth outpacing savings, the risks of sickness and unemployment, and the difficulty of convincing a bank to provide a home loan.
The COTA summit also heard from Dr Ian Winter at the Australian Housing and Urban Research Institute; Judith Yates from the University of Sydney; Jeff Fiedler from Housing for the Aged Action Group; and Paul McBride from the Department of Social Services.
Many of the same themes were covered in a recent report by consulting firm KPMG. It confirmed that it will be very difficult for older Australians to be debt free in later years, largely because of housing costs.