Australia is facing a growing crisis as two-thirds of retirees renting in the private market are living in poverty.
A recent report by the Grattan Institute highlighted the urgent need for increased rent assistance to support these individuals.
“Two in three retirees who rent in the private market live in poverty,” the report said, underscoring a worsening situation as homeownership among the poorer segments of older Australians rapidly declines.
From 1981 to 2021, homeownership among the poorest 40% of 45- to 54-year-olds has plummeted from 68% to just 54%.
This decline signals a bleak future for financial stability among Australia’s retirees, expected to increase by 70% by 2040, with most lacking adequate savings for rent.
The Commonwealth Rent Assistance program, intended to supplement the Age Pension for retirees who rent, is criticised for its inadequacy.
Despite recent increases of 27% over and above inflation in the past two budgets, the assistance remains insufficient.
According to the Grattan Institute report, “A single retiree who relies solely on income support can afford to rent just 4% of one-bedroom homes in Sydney, 13% in Brisbane, and 14% in Melbourne.”
The report also highlighted that rent costs have surged nearly 1.5 times faster than the rate of rent assistance since 2001.
The Grattan Institute report advocates for a 50% increase in the maximum rate of rent assistance for singles and a 40% increase for couples.
Additionally, it suggests indexing rent assistance to the rises in rents for the cheapest 25% of rental homes in capital cities, rather than merely to inflation.
These proposed changes would elevate the maximum rate of rent assistance by $53 weekly ($2,750 annually) for singles and $40 weekly ($2,080 annually) for couples.
Such adjustments would enable single retirees to spend up to $350 weekly on rent – sufficient to access the cheapest 25% of one-bedroom homes across Australian capitals.
Couples would be able to afford $390 weekly, covering the least expensive 25% of one- or two-bedroom homes.
The total cost to implement these increased benefits would be approximately $2 billion annually, with around $500 million of that amount aiding retirees.
The report suggests funding these increases through tighter superannuation tax breaks, curbing negative gearing, reducing the capital gains tax discount, or incorporating more of the value of the family home in the Age Pension assets test.
The Grattan Institute’s report, authored by Brendan Coates, Matthew Bowes, and Joey Moloney, serves as a crucial call to action.
“Australia is failing too many retirees who rent,” the researchers said, emphasising that only a substantial boost in rent assistance can guarantee a dignified retirement for all Australians.
For more information, access the full Grattan Institute report and read the media release.
