Pension asset change that would release thousands of homes

Almost 60,000 larger properties would be added back into the market for young families if financial penalties for pensioners were reduced.

Exclusive: Reducing financial penalties for pensioners who sell up their big house to “right size” into a smaller home and boosting rent assistance would add almost 60,000 larger properties back into the market for young families who need the space, research has found.

The reforms could unleash about 13,653 homes across 200 suburbs back into Sydney housing markets, generating more than $383 million in stamp duty revenue for the NSW government.

Lifting the age pension asset test has the potential to free up 28,000 homes, while a further 31,000 would be added if rent assistance access to was expanded so more older Australians could move into retirement villages, according to a new report commissioned by the Retirement Living Council (RLC).

Reducing financial penalties for pensioners who sell up their big house to “right size” into a smaller home and boosting rent assistance would add almost 60,000 larger properties back into the market for young families who need the space. Picture: iStock

About 1.9 million Australians aged 65 and over own their home either outright or with a mortgage, and rely on the age pension to cover their living costs.

RLC executive director Daniel Gannon said an “unintended consequence” of current thresholds for the pension meant these “asset rich, cash poor” older Australians were discouraged from “right sizing” into a smaller home.

“When government policy locks older people in their homes, something isn’t right,” he said.

“There are tens of thousands of older Australians trapped in big ‘family’ homes while young families are stuck in housing limbo.”

The new report found older Australians would consider “right sizing” into a smaller home “more favourably” if they did not perceive doing so to be an “overall financial loss” due to the impact on pension eligibility once the larger house was sold.

To achieve this the Retirement Living Council is calling on the federal government to lift the age pension asset test threshold from $314,000 for singles to $550,000 for those who “right size” into a smaller home.

This would encourage about 40,000 seniors to move into more age-friendly housing and release about 28,000 homes into the market for younger Australians.

RLC executive director Daniel Gannon said an “unintended consequence” of current thresholds for the pension meant these “asset rich, cash poor” older Australians were discouraged from “right sizing” into a smaller home.

It would also generate about $1.3 billion in stamp duty for state governments.

The council has also recommended changes to the Commonwealth Rent Assistance scheme that would bring the total number of houses released to more than 59,000.

This would be achieved through providing retirement village residents the same rent assistance eligibility as is currently offered to other seniors’ communities.

This would cost the government $244 million a year, but the council has argued this would be offset by cost savings through lower residential aged care spending and other economic benefits associated with unlocking housing supply.

Mr Gannon said when people keep living in homes no longer suited for ageing bodies, it often leads to “trips and slips”, which meant “increased interaction with GPs and hospitals”.

“We can’t afford to have older Australians miss out on living in communities that keep people

healthier and happier for longer because their pension might be pinched,” he said.

The report found the released homes would primarily be stand-alone houses with three bedrooms located in outer metropolitan areas with an average value of about $825,000.

Originally published as Pension asset change that would release thousands of homes