With housing affordability in Australia at its worst level on record and potential relief from new housing supplies years away, a QUT economist is proposing older homeowners be given incentives to rent out spare bedrooms.
Dr Lyndall Bryant, from the QUT Centre for Justice and School of Economics and Finance, has published a briefing paper - The role of older Australians in addressing the housing crisis: spare bedrooms, taxation and the pension.
With appropriate tenant matching and management, along with assurances that pensions will not be impacted or onerous tax generated, she suggests a solution that could be a win-win for both parties.
"Housing affordability is not forecast to improve until at least 2029 and we are seeing homelessness services experiencing a 'tsunami of homelessness' as tenants are priced out of the rental market," Dr Bryant said.
"As one possible solution, I propose we shift the housing debate from new supply to better utilisation of existing housing, by assisting older homeowners to increase rental stock through renting out their spare bedrooms.
"As at the 2021 census, there were 13 million unused bedrooms within the existing Australian housing stock.
"Older Australians represent the highest proportion of homeowners, with over 80% of persons aged over 65 owning their own home. Research shows three quarters of those homes contain three or more bedrooms, and 84% of these homes are under-utilised."
Dr Bryant said Australia is increasingly at a point in which the housing crisis intersects with the cost-of-living crisis which makes it harder for people to remain in their homes as they age as many are often 'asset rich and income poor'.
"Some 80% of older Australians rely at least in part on the age pension, and over 25% live in poverty," she said.
"Whilst older homeowners have a veil of housing security that renters do not, cost of living vulnerabilities exist around energy poverty and poor health due to thermal discomfort, inability to purchase essential items, food insecurity and social exclusion.
"If we can incentivise older Australians to rent out a spare bedroom, it serves the dial purpose of improving access to affordable housing and cost of living relief to vulnerable older Australians."
Dr Bryant said tax reform proposals in relation to housing supply generally focus on increased taxes to disincentivising homeowners for leaving homes vacant or using for short term accommodation.
"Inefficiency in the housing market by way of millions of spare bedrooms has been established but we don't know why homeowners fail to rent these for additional income," Dr Bryant said.
"The answer may lie in the complexity of the Australian taxation and social security systems and a fear of taxation: on additional income, loss of pension, and/or creation of a liability for capital gains tax.
"However, the Australian Tax Office makes provisions for "domestic arrangements" or other non-commercial rental arrangements to not be treated as assessable income for taxation purposes when board and lodging is provided.
"Homestay for international students is another form of domestic arrangement. Homestay hosts may earn around $350 per week to provide a fully furnished room and most meals. This too is not taxable income.
"For a pensioner on a fixed income, struggling to meet increased housing costs, the cost of feeding one extra person may be easily offset by an additional $350 per week income, tax free with the additional cross cultural and companionship benefits.
"Another option is to adapt the Work Bonus scheme which enables additional earnings of $504 a fortnight for single pensioners, and $660 per fortnight for couples without loss of any pension. This could be adapted to accommodate rental income."
Dr Bryant said there was also anecdotal evidence suggesting homeowners feared renting out a spare bedroom would attract capital gains tax when the property was sold but that this would rarely be the case. She added the concern could be overcome by the introduction of a short-term capital gains tax 'holiday' for a period of two to three years, giving homeowners an amnesty period, until new housing stock can be built.
"Millions of empty bedrooms exist and yet many older homeowners live in poverty rather than risk losing their pension or paying taxes by renting out a spare bedroom," she said.
"There is an urgent need for further research to be undertaken to explore opportunities to incentivise, support and protect older Australians to open their homes and unlock existing housing stock for immediate use."
The full paper can be viewed on QUT ePrints - The role of older Australians in addressing the housing crisis: spare bedrooms, taxation, and the pension.
Main image: Dr Lyndall Bryant. Photo: Tony Phillips.
