Productivity Commission hands down flagship report on seniors housing choices

Productivity Commission hands down flagship report on seniors housing choicesA new report from the Productivity Commission backs better downsizing choices for seniors and makes the case for reform.Housing Decisions of Older Australians, released on 1 December, examines the policies affecting the supply and cost of age-specific housing, the influence of the tax and transfer system on housing decisions, and the issues in using home equity release to support living standards in retirement.”When faced with lower incomes, older Australians are more likely to cut expenditure than draw down on their wealth, a surprising tale of precautionary saving,” explains Commissioner Karen Chester (pictured). “Most notably, this includes not accessing the wealth embedded in the family home.”This is despite the fact that most older home owners could actually achieve a modest retirement living standard over the remainder of their lives by drawing on their home equity,” Chester adds.The report finds 15 per cent of older Australians expect to downsize to a more suitable dwelling or age-specific housing, but that state and local planning systems remain the most significant barrier to the supply of innovative and affordable housing options.Analysis commissioned by the Property Council found Australia’s current retirement village population of 184,000 residents is set to more than double to 382,000 in the next decade.The Property Council’s executive director of Retirement Living, Mary Wood, says the Productivity Commission’s report shines a light on the planning and policy roadblocks that must be removed to improve housing choices.”Retirement villages are an increasingly popular and affordable choice but there is not enough supply to meet demand because of outdated planning systems,” Wood says.Other disincentives to downsizing include stamp duty and the current structure of the age pension means test. Wood says the most important factor is giving older Australians access to all retirement housing options.The Property Council has proposed a highly-targeted adjustment to the age pension means test, which would exempt up to $200,000 of home sale proceeds of full rate age pensioner homeowners aged over 75 who purchase a cheaper home within 12 months.Wood says “tightly targeted reform” allowing eligible pensioners to choose the most age-appropriate accommodation and unlock the equity in their family home would benefit seniors and the broader economy.PwC provided high level costings on this proposal to the Property Council. On indicative estimates calculated by PwC, the government could save $86 million per annum from this policy change, because people living in retirement villages significantly reduce demand for expensive residential aged care. “Our proposal avoids inequity and any distortions to the housing choices available to pensioners and is simple to implement and administer,” Wood says.”We encourage government to use the evidence available to them and seriously consider the significant benefits that could accrue from even a small reform in this area.”Download the Property Council’s Unlocking home equity proposal.