Retirees who rent in Australia today are being left behind. A new Grattan Institute report finds that two in three retirees who rent in the private market live in poverty.
And the report, Renting in retirement: Why Rent Assistance needs to rise, shows that the problem is set to get worse.
Home ownership is falling fast among poorer Australians who are approaching retirement. Between 1981 and 2021, home ownership rates among the poorest 40 per cent of 45-54 year-olds fell from 68 per cent to just 54 per cent.
Most older working Australians who rent do not have sufficient savings to keep paying rent in retirement. The poorest 40 per cent of renting households aged 55-64 have less than $40,000 in net financial wealth.
Commonwealth Rent Assistance, which supplements the Age Pension for poorer retirees who rent, is far too low.
The government has lifted the maximum rate of Rent Assistance by 27 per cent - over and above inflation - in the past two budgets. But even after these increases, 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.
And the rents paid by people who get Rent Assistance have increased nearly 1.5 times faster than the maximum rate of the payment since 2001.
The report calls on the government to increase the maximum rate of Rent Assistance by a further 50 per cent for singles and 40 per cent for couples.
Rent Assistance should also be indexed to increases in rents for the cheapest 25 per cent of rental homes in capital cities, rather than to inflation.
These increases would boost the maximum rate of Rent Assistance by $53 a week ($2,750 a year) for singles, and $40 a week ($2,080 a year) for couples.
This would ensure single retirees could afford to spend $350 a week on rent - enough to rent the cheapest 25 per cent of one-bedroom homes across Australian capital cities. And retired couples could afford to spend $390 a week, enough to rent the cheapest 25 per cent of all one- or two-bedroom homes.
Given that younger renters suffer even higher rates of financial stress, the increases to Rent Assistance should apply to working-age households as well.
Boosting Rent Assistance in this way for all recipients would cost the government about $2 billion a year, with about $500 million of that going to retirees.
The report says these increases could be paid for by further tightening superannuation tax breaks, curbing negative gearing and halving the capital gains tax discount, or counting more of the value of the family home in the Age Pension assets test.
'Australia is failing too many retirees who rent,' says report lead author and Grattan Institute Housing and Economic Security Program Director Brendan Coates.
'Only a further substantial boost to Rent Assistance can ensure that all Australians get the dignified retirement they deserve.'
