Retirement wealth gap widens as renting retirees struggle to survive
Record numbers of retirees struggle to pay rents as asset values surge for retired homeowners, creating a worsening wealth divide.
Retiree renters have risen in record numbers in the past two decades, widening the wealth gap between homeowners and other senior Australians in a trend that is tipped to continue.
The share of retirees living in private rentals climbed from 6 per cent in 2003 to 12 per cent in 2023, according to the 20th Household, Income and Labour Dynamics in Australia (HILDA) Survey, released on Friday.
“Retirement in Australia is becoming a two-tiered system,” said University of Melbourne senior research fellow and report co-author Kyle Peyton.
“Australia’s retirement system was built on the assumption that most people would own their homes by the time they retire,” he said.
However, the HILDA survey, which interviews the same 16,000 people each year, says declining home ownership among younger Australians “makes retirement without housing wealth increasingly common”.
It found that retiree renters not only miss out on property wealth but have smaller superannuation balances, with recent retirees having an average $277,000 in super, compared with recent retiree homeowners having $500,000 and owners with mortgages having $409,500.
“Homeowners tend to enter retirement with substantial financial security, while retirees who rent are far more exposed to housing stress,” Dr Peyton said.
Lyn Collins, 65, was among the growing group of Australians facing renting in retirement, but recently used her superannuation savings to buy a one-bedroom villa for $200,000 in an Aveo retirement village on Melbourne’s Mornington Peninsula.
Ms Collins had been renting for two decades after two marriage break-ups caused financial upheaval, and said now she had her own home, “a weight has been lifted from my shoulders”.
“I’m able to retire earlier and am planning for that to be the end of next year when I turn 67,” she said.
“If I’d still been renting, I would have had to continue working for at least another three years. I had a lot of anxiety and uncertainty while renting and that’s all gone.
“I feel safe and secure for the first time in many years.”
Council on the Ageing chief executive Patricia Sparrow said two in three retirees who rented were living in poverty. “That’s a shocking statistic that we can’t continue to ignore. For older single women, the figure is even worse, with 80 per cent of single retired women living in poverty.”
Ms Sparrow said government rental assistance should be urgently increased to help renting retirees avoid poverty.
HILDA’s Dr Peyton also wants increased Commonwealth Rent Assistance, plus Age Pension system reform. “Under the current system, the principal home is exempt from the assets test,” he said.
“This creates a stark inequity: a retiree renter must deplete their superannuation and savings to pay rent, while a homeowner lives rent-free in their most valuable asset, which is completely excluded from the test.
“Renters burn through their retirement savings much faster than homeowners – and that gap is only going to widen.”
Separate research has found young adults expect they will need nearly double what current retirees spend annually.
Dr Peyton said retiree households living in private rentals reported average annual rental payments of $18,229 in 2023, an expense homeowners did not face.
Government attempts to solve the housing affordably crisis keep hitting a brick wall of booming home values as surging migration increases demand.
Dr Peyton said chronic undersupply had pushed Australian property prices to among the highest in the world.
If current trends continued, he said, nearly one in four new retirees could be renters by 2043, while wealthy homeowners and their children increasingly used housing equity to buy more properties and grow their wealth.
“As homeownership becomes more concentrated, a growing share of renters will be paying income to an asset-owning class whose wealth compounds with rising property values.”
MyBudget founder and director Tammy Barton said the noticeable increase in retirees who rented was not surprising, given declining home ownership.
“It’s incredibly tough,” she said. “Housing is often the single biggest expense, and for a retiree on a fixed income, it’s a huge financial burden.”
Ms Barton said the short-term solution of ensuring government rent assistance kept pace with “skyrocketing rents” should be mixed with long-term housing policies that improved affordability and security of rental properties.
“This includes increasing the supply of social and affordable housing and providing incentives for developers to build properties suitable for older Australians,” she said.
Lyn Collins said buying her one-bedroom villa had given her financial security and freedom to do what she wanted with the property: “I’m keen to put up a pergola out the back, something I’ve always wanted to do”.
“I’ve had to move rental properties six times over the past 10 years, and it was costing at least $4000 every time with moving expenses and paying rent in advance,” she said.
“Having a place that’s mine feels like heaven and was the best thing that could have happened at my age when I’m looking towards retirement.”
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