Dr Kyle Peyton (left) has revealed what the retirement landscape will look like for retirees in the future if nothing changes. (Source: University of Melbourne/Getty)
A quarter of Australian retirees are expected to be renting in less than two decades rather than owning their homes. The number of Aussies renting in their twilight years has doubled from 6 per cent to 12 per cent between 2003 and 2023.
That’s the damning finding from the latest Household, Income and Labour Dynamics in Australia (HILDA) Survey. The study’s co-author, Dr Kyle Peyton, told Yahoo Finance that the “very concerning” situation won’t be rectified unless there is a dramatic change.
“It depends on what we do as a country over the next 20 years, but I don’t think it’s going to get any better,” he said.
“We’re going to be on the same trajectory that we’ve been on for the last 20 years, and in the next 20 years, there’s a pretty good chance that we could see something like 25 per cent of people going into retirement renting.”
He pointed to a Grattan Institute report from February that showed two in three retirees who rented in the private market lived in poverty.
Are you renting in retirement and want to tell your story? Email stew.perrie@yahooinc.com
The poorest 40 per cent of renting households aged 55-64 had less than $40,000 in net financial wealth.
According to the Association of Superannuation Funds of Australia’s (ASFA) retirement standard, a modest retirement for a renter is estimated to cost $66,296 per year for couples, and $49,044 per year for singles.
That’s significantly more than what homeowners without a mortgage needed for the same type of lifestyle, with couples requiring $48,184 per year, and singles requiring $33,386 per year.
Those who rent during their twilight years are at the whim of price hikes, evictions, and using their precious funds on housing all the way until the end.
The HILDA report found that while the percentage of retired renters with superannuation is growing (it’s now at 73.2 per cent), the rate is “substantially lower” than that of homeowners (93.3 per cent for those with mortgage paid off and 82.6 per cent still paying off mortgage).
Their average superannuation amount has also grown from $83,000 in 2015 to $277,000 in 2023, but that’s still well below the anticipated amount needed for a comfortable retirement.
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ASFA estimated that a 67-year-old couple would need $690,000 in their nest egg for a comfortable retirement, while a single would need $595,000.
A quarter of retirees could be renting by 2043 if current trends continue. (Source: Getty) · Catherine Delahaye via Getty Images
“These trends suggest that retirees who do not own homes are at a substantial disadvantage compared to homeowners,” the HILDA report said.
“While renters and those in other housing arrangements tend to retire at slightly younger ages than outright homeowners, they often face markedly different socio-economic circumstances.”
They included aspects like lower and more unstable incomes, higher housing costs relative to income, and limited access to the wealth-building benefits of homeownership.
If the current trends continue, the report suggested that younger generations could spend “most or all” of their working lives renting.
Peyton told Yahoo Finance that the government needed to do two things to prevent this retirement trend from growing.
One was getting more supply in the rental market, as the research fellow from the University of Melbourne’s Faculty of Business and Economics said there won’t be nearly enough homes for everyone in the future at the current build rate.
The government set an ambitious target to build 1.2 million new homes by 2029, but it’s falling well short of its annual targets.
The second fix, which he admitted was a much faster solution, was increasing the rate of Commonwealth Rent Assistance (CRA).
If you’re paying more than $439.20 per fortnight for rent as a single person, the maximum payment you can receive every two weeks is $215.40.
The median rent for houses and units across all Aussie capital cities is $650 per week, according to Domain.
Peyton pointed out that the Centrelink payment has been tied to inflation, and while it’s been lifted in recent years, it hasn’t kept pace with rent prices.
The Grattan Institute found that these prices have increased nearly 1.5 times faster than the maximum rate of CRA since 2001.
It also discovered that a single retiree relying solely on income support can afford to rent only 4 per cent of one-bedroom homes in Sydney, 13 per cent in Brisbane, and 14 per cent in Melbourne.
“There’s room for a lot of improvement there, just with some simple changes,” Peyton said.
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