Seniors should be given more options to downsize their homes, according to a recent research report by the Productivity Commission.
The report, Housing Decisions of Older Australians, examined policies affecting the supply and cost of age-specific housing, the influence of the tax and transfer system on housing decisions, and the issues in using home equity release to support living standards in retirement.
The Productivity Commission found that an increasing proportion of older Australians are looking to move into homes that are more suitable to their needs, as 15% of older Australians expect to downsize to a more suitable dwelling or age-specific housing. However, state and local planning systems remain the most significant barrier to the supply of affordable housing options, creating a need for reform.
Incentivising seniors for downsizing or moving to retirement homes could create a greater supply of housing and save public health spending by delaying entry to expensive aged care, it found.
The sale of the family home has been problematic for retirees as the sale proceeds can impact on their eligibility for a pension, resulting in many seniors remaining in unsuitable housing so that their pension eligibility will remain intact.
The Commission recommended the removal of the value of retirees’ homes from the eligibility test for the Age Pension. The exemption status of the family home from the pension means test “creates an incentive for over-investment in principal residences, and discourages downsizing”, the report said.
Though retirement villages serve as an affordable choice for seniors choosing to downsize, there is also currently not enough supply to meet demand because of outdated planning systems.
A PwC/Property Council of Australia retirement census study found Australia’s current retirement village population of 184,000 residents is set to more than double to 382,000 in the next decade.
Further PwC analysis commissioned by the Poperty Council found that the federal government could save up to $82 million annually if it didn’t penalise retirees downsizing into smaller homes or moving into retirement villages.
Itt was estimated that if the first $200,000 from seniors’ home sale proceeds was exempt from the Age Pension means test, more than 50,000 older Australians would choose to move.
“Tightly targeted reform… allowing eligible pensioners to choose the most age-appropriate accommodation and unlock the equity in their family home will benefit seniors and the broader economy,” said Mary Wood, the Property Council’s director of retirement living.
“Older Australians need access to all retirement living options, and the Productivity Commission’s research provides a powerful evidence base to pursue policies that provide this.”