Our research shows retirement renters are doing it toughest

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Once again, housing affordability has hit the headlines, this time in anticipation of a speech by Treasurer Scott Morrison, where he is expected to resist in refusing to change negative gearing concessions, but to offer a new public housing scheme in the May Budget.

And once again, the suggestion is that it is the younger members of society who are doing it tough in this overheated property bubble. Yet, the research shows a very different tale. In particular, the plight of retirement renters revealed by YourLifeChoices and The Australia Institute (TAI) suggests that these retirees are doing it toughest of all.

The inaugural Retirement Affordability Index was released yesterday. Analysis of the six retirement tribes – Affluent Couples, Constrained Couples, Cash-strapped Couples, Affluent Singles, Constrained Singles and Cash-strapped Singles – has revealed a very different life in retirement for each group. Singles who rent spend 29 per cent of their income on housing. Couples who rent spend 22 per cent. Those who own their own homes spend 8 to 16 per cent.

So what do they go without? Renters spend much less on health. It is fair to assume they have similar health needs to others their age, but are choosing or are being forced to spend less, perhaps foregoing vital tests or preventative measures which are considered necessary by wealthier retirees.

Similarly, with recreation and transport (including maintaining a car), the average retired renter is spending just $80 per week compared to the average retired homeowner who is spending $200 in this category. As Matt Grudnoff from TAI has noted, “This means that retired renters have significantly less opportunity to interact with other people and get out of the house. Retirement for some people can be a lonely and isolating time. Being a renter in retirement can only increase the chance of this as these individuals are more likely to be stuck at home, owing to their reduced financial circumstances.”

And the third area of major concern for retirement renters is their exposure to rising costs. The Retirement Affordability Index has also revealed the sharp difference in exposure to rising costs. Both the renting retirement tribes (Cash strapped Couples and Cash-strapped Singles) are facing higher price increases than the Consumer Price Index (CPI). Those on private incomes (Affluent Couples and Singles) are facing lower price rises than the CPI, and those on an Age Pension, but who own their own homes (Constrained Couples and Singles) are experiencing price increases in line with the CPI.

So let’s hope that this retirement rental stress is factored into the equation when the Treasurer suggests his solutions to the housing affordability crisis in the May Budget.

What do you think? Are you a retiree renter? Do you believe your costs are rising faster than CPI? And if you are a homeowner, how do you view the current housing market bubble?

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Written by Kaye Fallick

41 Comments

Total Comments: 41
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    Good to see this issue getting some air time as it is one that I have been dealing with for three years since I retired at 65. Initially I shared rent with my son to ease the burden. However, as the cost of rentals in that community went up I then moved to another place 1500 kms from my family and friends because I could rent a house there for a similar price to sharing a two bedroom unit with my adult son. Rentals now in this place have escalated and so I am not sure what I will do next. At times I wish i only had say ten years to live so I could use my limited super to supplement my rent and use it to live where my family and friends are. I know there are many who are judgemental of single people over 65 who do not ahve their own home. what these people are ignoring is the aftermath of divorce in later life and the loss of the family home. Even though there was no first home buyers assistance when I was younger, I am invisible in the current housing affordability discussion as I at one point had a mortgage. Interestingly when the family home was sold in the aftermath of the divorce it was sold for 15% less than what had been paid for it many years earlier. I am writing these comments merely to illustrate the burden that competing in the rental market places on persons dependent on the age pension, even if we do get the $129 a fortnight rental assistance. Please do not bother to troll me back and say things like I should never have divorced etc.

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      Not judgmental Clare bear.
      It is a reality.
      We are the generation of divorcees where women were awarded help to raise the children and that was it.
      We were the generation who were expected to stay home and raise children not forge a career. That resulted in many of our age group earning very little.
      It is OK while one has a job but eventually time takes its toll and you can only hope family will help out.

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      A well written, and informative piece ‘Clare bear’. With respect to financial stability….and the various reasons that can affect it, no one knows what can be adversely encountered around the next corner.

      No trolling judgement here!

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      I remember most Australians rented all their lives or made a purchase after they retired. Rents usually didn’t go up until a tenant moved out. This encouraged people to stay where they were. There was the Fair Rents Commission that you could complain to if the place was neglected or the rent was too high. There were rooming and boarding houses that were cheap for our transient population.

      I remember pensioners always having done it tough, none were ever well off. They didn’t live the luxurious lifestyle of today. They stayed home and watched their pennies. Many home buyers purchased not from a bank but the owner and paid the owner.

      No overseas person could launder their money into our property until corruption infiltrated our parliament during the 1980s.

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      I feel for you Clare bear. I hope some of the contributors to this forum who are always griping about how unfair the government is to them get some perspective from your situation and the many others who are in a similar situation. From my reading of their complaints they are more often than not relatively well off.

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    Several years ago I was told a single income person would need $800K to retire and live on $35K. Now I read they need $1.4m. When I was told this I realised that my entire salary deposited in a super fund would not accrue that much wealth.
    $35K is not affluent as the report suggested. It is still base line poverty. The bills that are now fixed monthly rather than on usage and won’t go away. The Land Valuer just sent a statement to say how much my land was worth now. It doesn’t stop.
    In fact 10 years ago I found it so depressing I stopped going to financial pep talks. Accepting that its impossible is so much easier to live with.
    I had the Plan B retirement option of being eaten by a polar bear but the poor things are probably going to be extinct before me!
    How lucky were our parents with their superannuation funds.

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      The Superannuation industry are always trying to con people into believing they need more for retirement than is really necessary.
      They have a vested interest in doing this as it boosts their incomes.

      It is very difficult to determine exactly how much an individual needs for retirement as we are all different with different expectations.
      If you want to head off each year overseas or for an ocean cruise then of course you will need more than if you are more modest in your expectations.
      It is definitely harder if you do not own your own home and I feel sorry for those who were unable to manage that.
      I guess the issue we all face is that those who are making the decisions re pensions etc are all sitting pretty themselves and will never be confronted with the problems so many of us have.

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      Rosret – I agree with Tom Tank. According to the ASIC MoneySmart Retirement Planner $380K would be required to fund a single homeowner in retirement with $35K per year retiring at 65 with their money running out at age 90. The Planner assumes a conservative 4.2% return on investment and factors in the Age Pension. It really bugs me how this gets inflated by vested interests to the point that people like yourself give up in despair.

      I can only assume that YLC comes up with $1.4m to fund $35K based on living only on the earnings from the capital. Also, who in their right mind is going to invest $1.4m at 2.5% return.

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      Further to the foregoing. I also assume that YLC does not include the Age Pension as it would be unlikely to be applicable if the capital is being preserved.

    • 0
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      Tom Tank, it’s not just expectations that dictate need. It’s also health, family circumstances, psychological factors, education, etc. To assume renters are automatically worse off than homeowners is ridiculous, and creates a situation where many renters suffer great hardship while others are far better off than their home-owning neighbours.

      The current system of means testing pensions ignores critical factors such as health costs, care needs, ability to invest well (which varies due to education and due to psychological factors such as fear of risk resulting from early hardship or loss), the condition of the family home, the ability of the occupant to access low-cost maintenance help (eg. do they have sons who help out, or no family living nearby?). Then there is the question of whether adult children are able to help out, or are needy and rely on retired parents for some support and help to provide adequately for their children. Some retirees are assisting to support elderly parents. None of these factors are considered in ”means tests” that assume everyone is equal, except non-homeowners who are assumed to be needier, regardless of their circumstances.

      The pension system in Australia is broken. The Greens secured an agreement that it would be fully reviewed, but that agreement – like most others this stinking Government entered into – was reneged on. No wonder the LNP is losing the support of our age group! I just wish there was a viable alternative.

  3. 0
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    Hello,
    Well I am going on 71, and still working because I cannot afford to retire and live on the pension. I too rent and my divorce many years ago took most of the money I got for the sale of the family home. Then the GFC took most of my super…so what to do? the Govt doesnt want to help us oldies even though I have paid taxes for over 50 years. Its appalling! I dont know what my future holds…

    • 0
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      Agree Vonveevee. There is NO incentive now to work past pension eligibility age. Bring back the Pension Bonus Scheme and reward those who work longer and stay off the pension. Now – there is no benefit, no incentive. I knew a senior manager who was earning well over $200k per year. Worked till he turned 70 – then got around $56,000 from the Pension Bonus scheme. Now – no incentive – just constant penalizing and chastising from the Govt because we are living longer than they want us to. No wonder people decide to go on the Aged Pension and not work themselves in to an early grave. Stop punishing those who want to work, contribute their tax, and try to be self supportive in their older years. I am nearly 65, and still have to work for many years.

    • 0
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      Vonveevee, it’s a tough hand you have been dealt only softened by the fact that you are still working. Imagine like circumstances happening to someone in their 50s or 60s, average super ($323,000 for this age group), unable to find work, ineligible for social security and no prospect of change in the short term.

  4. 0
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    Maybe the Taxation Dept should be more proactive and start nailing the hundreds of landlords who do not declare their income. In the past 6 months I’ve rented rooms near the Gold Coast hospital, due to a heart condition. Waiting periods between appointments has been 2 months or more. Of the 5 places I’ve rented, only two landlords have been willing to a) use their correct name and b) to sign a rental form for assisted rent via Centrelink. One of these landlords not signing was getting $50,000 a year in rental.
    Maybe if tax was paid by these pirates, a bit more would be available to pensioners.

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      The only way to stop those unscrupulous landlords is to report them to the authorities such as the tax-office and even the police. Not doing so allows them to continue with the next person after you have moved on.

    • 0
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      Many legislations have been changed for the rich to keep getting richer. What is on paper does not exist in practice.

  5. 0
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    Interesting points raised from everyone, especially Clare bear, don’t worry, a lot of us have also been down the divorce trail & know what it is like to start again. Yes these greedy investors get up my nose with the unbelievable rents they charge, I just don’t know how people manage. My son pays $500.00 per week & has to ask for months & months for things to be fixed, some of them which could cause dangerous situations. I now live in a retirement village with my second wife, like I say having to start again, at least it’s something we can afford to own & even though a bit high, the weekly site fee is cheaper than paying rent & there are no rates or stamp duty to pay when purchasing. But even some of these can be a trap especially if you want to leave so I urge anyone interested in going into one to have a solicitor really check the fine print.

    • 0
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      In regard to Retirement Villages not only get a solicitor to review the contract but more importantly get an accountant/financial advisor to review the contract. The more up market lifestyle resort villages that I looked at return in the range of 65% to 88% of the original purchase price upon exit after 10 years. If you take account of inflation at say 2.5% then the return upon exit is in the range 57% to 69%.

      For example the most expensive in terms of exit fees returned only $325K of the $500K entry price after 10 years. (With this village there was no sharing of any capital gain when the unit is sold and a 35% Deferred Management Fee applied). Assuming 2.5% inflation then in todays dollars the return would be about $253K.

      Retirement Villages are definitely a lifestyle choice, not a financial investment.

  6. 0
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    Even people like me on a disability pension rent and this pension is the same aged pension. Due to health concerns my living costs increase and have to sacrifice holidays, There needs to more affordable housing for people on pensions who have to rent.As for younger people who may be encouraged to sue super to get a foothold into saving for a house not a good idea. Many young people who do have jobs are just starting to build up their super for their retirement nest egg.

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      The government needs to look at its priorities. I know a person who has faked disability for 30 years and has acquired, somehow, a lifetime right of occupancy of public housing at low rent. Now she has inherited a small fortune and sank almost all of it into a luxury home so that she could still get the full pension. She was never genuinely disabled, but she occupied a unit at discount rent for decades that someone genuinely needy should have had, and now she’s claiming a full pension that she has no need of if she had accepted modest accommodation. I don’t have an issue with people who have worked hard and paid off a home remaining in it and collecting a pension, but for someone who has never worked a day in her life to continue bludging on the taxpayer when she could buy a modest home and be self-supporting is wrong.

  7. 0
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    Sad as it is, it would appear that the only way retired renters can make ends meet is to share and thus reduce the cost of renting. In addition, many may have to move to areas where rents are lower – e.g. country areas. At the end of the day, lateral thinking may be the only way that retired renters can keep their head above water.

    • 0
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      Sharing may have its pitfalls as far as Centrelink is concerned. They may consider that you are in a relationship ( you will have to prove that you are not) and pay you the “couple” pension rate.

    • 0
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      Sharing should be a natural option for retired renters without risking disadvantage from their Centrelink treatment. It is beyond ridiculous that two unrelated people sharing can be considered to be a couple” while two family members sharing are considered to be “singles” e.g. mother/daughter, brother/sister.

    • 0
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      @Farside, Centrelink want to know if you are sharing, they will then assess the situation and make a decision on the status of the pensioner. This is fair enough as a married couple or a couple living together either opposite or same sex are mostly paid the couple rate.I would rather see that everyone receives a pension as an individual regardless of the relationship status.

  8. 0
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    Where did the Retirement Affordability Index get their figure for the percentage of 29% for a single’s rental cost against income? I pay 32% of my monthly income in a 4-week month, and 40% of my monthly income in a 5-week month even though my ‘income’ includes the $129 Rental Allowance. Even with that, it’s still a higher percentage. And I have a relatively low rent for a run-down place.

  9. 0
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    They got out drinking eating and generally experiencing the NOW time I DESERVE time and WHY SHOULD I NOT ENJOY I earnt it. sort of life instead of saving or saving for a house with the misconception that house buying costs more than renting… Why do people provide houses to rent DAH!!!! cos it makes money.
    You spent it when you were young I spend it now I am older. Don’t want the cake
    and eat it also….

    • 0
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      Many on the pension do. Missed opportunities abound among this group. I have no quibble with them spending their money on whatever they like, that is their choice, yet they still receive a full pension and expect it. Likewise those that preferred to save, buy their own home to use in retirement, then they must also be entitled to a pension.The continuing thrust by certain groups and politicians to include the family home as a an asset is an affront on those that waited to spend their own money. Pensions for all regardless of income/assets.

    • 0
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      I agree niemakawa. This attitude that those who worked and earned must now sacrifice everything will drive a growing welfare mentality that will continue to drive the cost of pensions up. Incentives and fair rewards reduce dependency and reduce costs. What this government is doing – urged on by the arrogant and selfish well-to-do – is the exact reverse of what is needed to reduce dependency and pension costs. Abolish the means tests completely and instead impose fair taxes on retirement income above a basic threshold. It will cost far less and restore incentive, resulting in far more retirees being self-supporting.

    • 0
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      I agree niemakawa. This attitude that those who worked and earned must now sacrifice everything will drive a growing welfare mentality that will continue to drive the cost of pensions up. Incentives and fair rewards reduce dependency and reduce costs. What this government is doing – urged on by the arrogant and selfish well-to-do – is the exact reverse of what is needed to reduce dependency and pension costs. Abolish the means tests completely and instead impose fair taxes on retirement income above a basic threshold. It will cost far less and restore incentive, resulting in far more retirees being self-supporting.

  10. 0
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    Studies have shown that cancelling negative gearing will reduce rental properties, not increase them and then the laws of supply and demand will come into play thereby increasing rents.

    • 0
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      Perhaps those rental properties that go on sale due to removal of negative gearing will be purchased by current renters as housing costs decline, thereby balancing the equation.

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