The Australian Productivity Comission has today released it’s “Housing Decisions of Older Australians” report.
Housing is integral to people’s wellbeing, particularly for older Australians. For many older people home ownership provides security and independence in retirement.
Older Australians strongly prefer to age in place. Most people are happy staying in their family home, despite a common perception that such homes are too big for them.
For others, age-specific housing options provide more integrated accommodation and care, offer a way to release home equity, and may delay entry into residential aged care. Growth in retirement villages and manufactured home estates has been strong, despite planning restrictions.
About 15 per cent of older Australians are renters, and these people are generally a highly vulnerable and economically disadvantaged group.
There is a general lack of affordable downsizing options for older Australians, due in large part to the red tape and inconsistencies within state and territory land planning regimes.
Residential aged care is effectively transforming into an end of life care service. The age of admission is increasing (now 83 years on average), average tenure is about 2 to 3 years, and care needs are higher.
Many older people are reluctant to plan or get advice for possible future care and end of life needs. Decisions can be prompted by crises, and made when the person is vulnerable.
There are positive signs from the recent reforms in aged care, including improved financial viability, transparency, and consumer sovereignty. However, further reform is needed.
About 800 000 older Australians receive home care. Older people’s desire to age in place aligns with governments’ fiscal goals – in most cases, assistance for home care is considerably less costly than for residential aged care. Nevertheless, there may be merit in increasing co-contributions for both home and residential aged care.
Most of older Australians’ wealth is in the family home, but it remains an untapped source of retirement income. Many older Australians, including some of the poorest retirees, continue to save (spending less than their Age Pension) even very late in life. The main reasons for such behaviour are precautionary saving and a strong aversion to debt in old age.
This precautionary saving is driven by uncertainty around longevity, health and residential aged care needs, and is a potentially expensive form of ‘self insurance’ that can lower living standards in old age.
Most older Australian home owners on low incomes could achieve a modest retirement living standard over the remainder of their lives by drawing on their home equity.
Financial equity release products could facilitate withdrawal of home equity to fund retirement needs. However, this market is small and unlikely to grow in the near term:
Most providers are diffident due to small market size and the risk of reputational damage.
Broader reluctance by older people to tap into home wealth and strong aversion to debt, coupled with the high cost of such products are impeding demand. The tax and transfer treatment of the family home further reinforces this.
Mary Cavar (Assistant Commissioner) 03 9653 2187
Leonora Nicol (Media, Publications and Web) 02 6240 3239 / 0417 665 443
Read the Full Report: