By Millie Muroi
Two of every three renting retirees live below the poverty line, and the problem will worsen as future generations age into retirement without owning their own home, according to a new report.
While Baby Boomers have largely reached retirement age and are still the richest generation, a key financial trait separates poor retirees from those living out their twilight years comfortably.
It’s a gap set to worsen as Generation X and Millennials head towards retirement age amid an ongoing national housing crisis.
Experts warn lower home-ownership rates will make poverty among retirees worse in coming decades.Credit: Oscar Colman
A report from the Grattan Institute has found that while most retirees report feeling financially comfortable – three-quarters of retirees own their own home – those renting report alarming rates of financial stress. Half of retirees renting in the private market have less than $25,000 in savings, and two in three live in poverty.
The report, released on Monday, comes as polls indicate a tight upcoming election as both major parties try to prove they have policy solutions to address the nation’s housing crisis.
On top of a pledge to build 1.2 million homes by mid-2029, Labor has promised a $10,000 sweetener to attract more workers to the construction industry, and Treasurer Jim Chalmers has said pre-fabricated homes could help the government reach its target.
Voters, meanwhile, have strongly backed a Coalition plan to stop foreign investors buying residential property.
Grattan housing and economic security program director Brendan Coates said the retirement outlook was likely to be worse for Gen X and younger generations as home ownership continued to plunge among poorer Australians.
“Today’s low-income renters are tomorrow’s renting retirees,” he says. “And whereas a third of retirees who rent today live in social housing, where rents are capped at 30 per cent of income, far fewer can expect to do so in future because there simply isn’t enough social housing.”
Between 1981 and 2021, home ownership rates among the poorest 40 per cent of 45- to 54-year-olds fell from 68 per cent to just 54 per cent. And the report found many older working Australians do not have enough savings to keep paying rent into retirement.
“The poorest 40 per cent of renting households aged 55 to 64 have less than $40,000 in net financial wealth,” the report states.
While Coates has also advocated for measures to boost housing supply, he says there needs to be an immediate increase to Commonwealth Rent Assistance, which is paid on top of the age pension.
“A single retiree who relies solely on income support can afford to rent just 4 per cent of one-bedroom homes in Sydney, 13 per cent in Brisbane and 14 per cent in Melbourne after covering basic living expenses,” he said. This was true even after recent increases in rent assistance.
Over the past two budgets, the federal government has raised the maximum rate of rent assistance by 27 per cent – above the rate of inflation but still well short of the rent increases paid by those who get the payment. Rents have increased nearly 50 per cent faster than the maximum rate of the payment since 2001.
The report calls for rent assistance to be lifted by a further 50 per cent – or $53 a week – for singles, and 40 per cent for couples, which would allow them to afford the cheapest 25 per cent of one-bedroom and two-bedroom homes across capital cities.
Coates said this increase would cost about $2 billion a year, which could be paid for by tightening superannuation tax breaks, curbing negative gearing and halving the capital gains tax discount.
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