No place like home: The impact of declining home ownership on retirement

Australia’s retirement income system has long implicitly taken it for granted that the vast majority of retired people will have very low housing costs – in turn reflecting a presumption that most of them will own their own homes, and will have fully paid down any mortgage debt taken on in order to finance the original acquisition of their homes; and that those who have been unable to become home-owners during their working lives will typically be accommodated in low-rental housing provided by State and Territory Governments. Consistent with this view, the Australian Superannuation Funds Association (ASFA) retirement standard budgets – both ‘comfortable’ and ‘modest’ – assume that retirees own their homes outright and hence make no provision for housing costs. And these presumptions have allowed successive Australian Governments to maintain age pensions at lower levels than in most other ‘advanced’ economies without resulting in higher levels of poverty among retirees. However, these assumptions are becoming increasingly dubious, as a result of three trends which have emerged over the past two decades.